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Olin Corp (OLN) Q2 Earnings Top, Revenues Lag Estimates

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Olin Corp (OLN) Q2 Earnings Top, Revenues Lag Estimates

Olin (OLN) raises adjusted EBITDA forecast for 2018.

Olin Corporation OLN logged a profit of $58.6 million or 35 cents per share in second-quarter 2018 against net loss of $5.9 million or 4 cents a year ago.

Barring one-time items, earnings came in at 54 cents per share in the quarter, beating the Zacks Consensus Estimate of 39 cents.

Revenues rose roughly 13% year over year to $1,728.4 million, missing the Zacks Consensus Estimate of $1,773 million.

Olin Corporation Price, Consensus and EPS Surprise

 

Olin Corporation Price, Consensus and EPS Surprise | Olin Corporation Quote

Segment Review

Chlor Alkali Products and Vinyls: Revenues at the division increased 18% year over year to $1,018.7 million in the second quarter, mainly on the back of higher chlorine, caustic soda and other chlorine-derivatives pricing and increased volumes, partly offset by lower ethylene dichloride pricing. Caustic soda prices increased roughly 5% in the second quarter compared with the first quarter.

Epoxy: Revenues at the division went up around 11% year over year to $543.8 million, mainly backed by higher product prices.

Winchester: Revenues at the division declined around 2% year over year to $165.9 million, mainly due to lower sales to commercial customers, partly offset by higher military sales.

Financials

Olin ended the second quarter with cash and cash equivalents of $144.2 million, down around 22% year over year. The company repaid $80.1 million of outstanding debt using available cash during the first half. Long-term debt was $3,512.6 million at the end of the reported quarter compared with $3,518.9 million a year ago.

Olin repurchased roughly 0.3 million shares of common stock for $9.1 million in the quarter.

Outlook

Olin expects domestic caustic soda prices to increase further in the third quarter. Steady growth in global demand, chlor alkali capacity reduction across North America, Europe and China over the last two years and minimal capacity addition supports the continued caustic soda cycle, per the company.  The company has also raised the adjusted EBITDA forecast for 2018 to $1.3 billion (+/- 4%, considering upside opportunities and downside risks). According to the company, the favorable supply and demand dynamics in the Epoxy resin markets have provided a constructive near-term outlook for its Epoxy business. However, it expects higher propylene costs to pose a challenge in the second half of 2018.

Price Performance

Shares of Olin have lost 18.1% in the past six months, underperforming the industry’s 1.6% decline.

Zacks Rank & Stocks to Consider

Olin currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space are Celanese Corporation CE, Steel Dynamics Inc. STLD and BHP Billiton Limited BHP.  

Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). The company’s shares have moved up 22% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics has an expected long-term earnings growth rate of 12% sports a Zacks Rank #2 (Buy). The stock has rallied 35.3% in the past year.

BHP Billiton has an expected long-term earnings growth rate of 5.3%, carrying a Zacks Rank #2. Its shares have shot up roughly 27% over a year.

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