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Olin (OLN) Misses Earnings and Revenue Estimates in Q1

Zacks Equity Research

Olin Corporation OLN 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 chemical maker’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.

Olin Corporation Price, Consensus and EPS Surprise

 

Olin Corporation Price, Consensus and EPS Surprise

Olin Corporation price-consensus-eps-surprise-chart | Olin Corporation Quote

Segment Review

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.

Financials

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.

Outlook

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.

Price Performance

Shares of Olin have lost 35.1% in the past year, underperforming the industry’s 23.9% decline.



 

Zacks Rank and Stocks to Consider

Olin currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include Sandstorm Gold Ltd. SAND, Flexible Solutions International Inc. FSI and Air Products and Chemicals, Inc. APD.

Sandstorm Gold has an expected earnings growth rate of 200% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 8% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 114% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. Its shares have shot up around 26% in the past year.

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