On Wednesday, Piper Sandler adjusted its outlook on Olin Corporation (NYSE: NYSE:OLN) shares, reducing the price target to $51 from the previous target of $57 while maintaining an Overweight rating on the stock. The decision comes after the firm reviewed Olin's third-quarter earnings, updated guidance, and insights from recent channel checks.
The firm has revised its model for Olin to account for a lower earnings forecast for the year 2025, attributing this adjustment to an extended recovery cycle. Despite the reduction in the price target, Piper Sandler continues to see a strong potential for upside once signs of recovery become evident in the market.
The analyst anticipates that the earliest indications of a recovery could emerge by the second quarter of 2025. This forecast is based on expectations that the European Union may implement anti-dumping duties on epoxy and that Chinese economic stimulus measures may start to have an effect. The United States is projected to remain the primary contributor to Olin's earnings during this period.
The valuation of Olin is anchored on an 8.0x multiple of the estimated 2025 enterprise value to EBITDA, which remains unchanged. According to Piper Sandler, this multiple suggests that the expected 2025 EBITDA for Olin is still significantly below what would be considered mid-cycle levels.
In other recent news, Olin Corporation has experienced a series of adjustments to its financial outlook by several analyst firms due to the impact of hurricane-related disruptions and operational issues. RBC Capital and KeyBanc Capital Markets have revised their price targets for Olin to $48 and $56 respectively, while maintaining positive ratings.
Deutsche Bank (ETR:DBKGn), however, has trimmed its outlook from $48 to $45, maintaining a Hold rating. Goldman Sachs (NYSE:GS) has reaffirmed its Neutral rating and a price target of $46, citing concerns about Olin's fourth-quarter EBITDA guidance.
Olin's recent earnings announcement revealed weaker than expected results for the second half of 2024, largely attributed to hurricane-related disruptions costing the company approximately $135 million. Despite these challenges, the company's chemicals segment exceeded expectations, primarily due to an increase in caustic soda prices. However, the Winchester segment experienced a downturn in commercial ammunition sales.
In the upcoming Investor Day, Olin Corporation plans to discuss strategic goals, financial performance, and potential growth opportunities. This includes the possibility of separating the Winchester business and partnerships with Dow. These are the latest developments for Olin Corporation.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Piper Sandler's analysis of Olin Corporation (NYSE: OLN). The company's market cap stands at $4.77 billion, with a P/E ratio of 33.71, reflecting the current challenges in the market.
InvestingPro Tips highlight that Olin has maintained dividend payments for 51 consecutive years, demonstrating a commitment to shareholder returns despite market fluctuations. This aligns with Piper Sandler's maintained Overweight rating, suggesting long-term confidence in the company.
The stock's recent performance, trading near its 52-week low with a 9.33% decline in the past week, corroborates Piper Sandler's decision to lower the price target. However, InvestingPro data shows a fair value of $48.26, indicating potential upside from the current price of $40.89, which supports Piper Sandler's view on recovery potential.
It's worth noting that InvestingPro offers 13 additional tips for Olin Corporation, providing a more comprehensive analysis for investors looking to delve deeper into the company's prospects.
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