On Monday, KeyBanc made adjustments to its financial outlook on Oiln (NYSE: OLN), reducing the price target to $73 from the previous $78 while maintaining an Overweight rating on the stock. The revision reflects a tempered but still optimistic view of the company's earnings recovery trajectory into the second half of 2024 (2H24).
The firm's analysis suggests that Oiln's earnings are on a recovery path, with management's second-quarter guidance indicating a less steep recovery curve than previously anticipated. Consequently, the full-year 2024 guidance of approximately $1.3 billion is seen as an optimistic but attainable target.
Despite acknowledging the potential risk of a future guidance reduction, KeyBanc continues to consider Oiln as one of the most compelling investment opportunities within its coverage area. The firm pointed out that there is no substantial evidence to support the bear case scenario of a significant drop in chlorine values, as per the first-quarter update.
Oiln's current market valuation is noted to be attractive, trading at 4.7 times normalized enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This makes it the least expensive stock among KeyBanc's commodity coverage. Additionally, the firm highlighted an increase in customer inquiries for volumes in the latter half of the year, which bolsters management's confidence in achieving earnings stability throughout 2024.
In summary, while KeyBanc has slightly lowered its price target for Oiln due to a softer earnings forecast, the firm reiterates its positive stance on the stock, emphasizing its long-term potential and current undervaluation in the market.
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