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Olin (OLN) Shares Rally 96% YTD: What's Driving the Stock?

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·3 min read
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Olin Corporation’s OLN shares have shot up 96% so far this year, outperforming the industry’s rise of 7.4%. The company has also topped the S&P 500’s 19.6% rise over the same period.

Let’s dive into the factors behind this Zacks Rank #2 (Buy) stock’s price appreciation.

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Zacks Investment Research


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What’s Favoring the Stock?

Olin is benefiting from the Lake City U.S. Army contract, productivity actions, and investment in the Information Technology (IT) project. Better-than-expected earnings performance in the first two quarters of 2021 and upbeat prospects have also contributed to the rally in the company’s shares.

Olin, on its second-quarter call, said that it anticipates Chlor Alkali Products and Vinyls, Epoxy, and Winchester segments’ third-quarter results to increase sequentially. Moreover, it expects third-quarter 2021 adjusted EBITDA to improve sequentially from second-quarter 2021 levels.

Earnings estimates for Olin have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased 35.6%. The consensus estimate for third-quarter 2021 has also been revised 35.3% upward over the same time frame.

The Zacks Consensus Estimate for earnings for 2021 for Olin is currently pegged at $7.16, reflecting an expected year-over-year growth of 630.4%. Moreover, earnings are expected to register 1,115% growth in third-quarter 2021.

Olin’s Winchester segment is poised to benefit from the Lake City U.S. Army ammunition contract. The multi-year contract is expected to significantly boost annual profitability of the unit. Notably, sales from the segment more than doubled year over year in the second quarter, driven by higher commercial and military sales as well as higher commercial ammunition pricing. The company expects the Lake City contract to increase Winchester's annual revenues by $450-$550 million.

The company remains committed to improve its cost structure and efficiency and also drive productivity through a number of projects. It currently has more than 1,200 active productivity projects that are expected to contribute to savings in 2021. It expects productivity measures to deliver $100 million of net savings in 2021.

Olin is also expected to gain from cost and other benefits from its investment in the IT project. The project, which involves implementation of necessary IT infrastructure, is expected to maximize cost effectiveness, efficiency and control over its global chemical operations by standardizing business processes.

Olin Corporation Price and Consensus

Olin Corporation Price and Consensus
Olin Corporation Price and Consensus

Olin Corporation price-consensus-chart | Olin Corporation Quote

Other Stocks to Consider

Some other top-ranked stocks worth considering in the basic materials space include AdvanSix Inc. ASIX, The Chemours Company CC, and Avient Corporation AVNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AdvanSix has a projected earnings growth rate of 160.4% for the current year. The company’s shares have shot up around 209% in a year.

Chemours has an expected earnings growth rate of 86.4% for the current year. The company’s shares have gained around 44% in the past year.

Avient has an expected earnings growth rate of 75.1% for the current year. The stock has also surged around 73% over a year.


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