It has been about a month since the last earnings report for Olin (OLN). Shares have lost about 2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Olin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Olin Misses Earnings and Revenue Estimates in Q1
Olin recorded a profit of $41.7 million or 25 cents per share in first-quarter 2019, up from a profit of $20.9 million or 12 cents per share a year ago.
Adjusted earnings for the quarter were 28 cents per share, missing the Zacks Consensus Estimate of 32 cents.
The company’s revenues fell roughly 9% year over year to $1,553 million in the quarter, also falling short of the Zacks Consensus Estimate of $1,619 million.
The company witnessed weakness in caustic soda pricing in the quarter. Prices declined 9% on a sequential comparison basis in the quarter. Olin also faced challenges from shipping disruptions related to the closure of the Houston Ship Channel.
Chlor Alkali Products and Vinyls: Revenues at the division fell around 7% year over year to $872.2 million in the quarter, due to lower caustic soda pricing, partly masked by higher chlorine, ethylene dichloride and other chlorine-derivative pricing.
Epoxy: Revenues at the division went down around 13% year over year to $524 million, hurt by reduced cumene volumes and lower product prices.
Winchester: Revenues declined around 8% year over year to $157.2 million, mainly due to lower military and commercial sales.
Olin ended the quarter with cash and cash equivalents of $105.7 million, down around 3% year over year. The company repaid $50 million of debt using its cash during the first quarter. Long-term debt was $3,067.2 million at the end of the quarter, down 13% year over year.
Olin repurchased roughly 0.6 million shares of common stock for around $13.2 million in the quarter.
Moving ahead, Olin expects caustic soda pricing in the second quarter to decline from the first quarter levels. The company expects prices to recover during the second half of 2019.
The company expects second-quarter adjusted EBITDA to be lower than the first quarter due to lower caustic soda pricing and sequentially higher planned maintenance turnaround costs. However, Olin envisions adjusted EBITDA for second-half 2019 to be stronger than the first half.
The company continues to see adjusted EBITDA for 2019 to be comparable to 2018 levels. However, it now believes that there is more downside risk than upside potential for 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -64.23% due to these changes.
At this time, Olin has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Olin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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