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Olin (OLN) Stock Up 78% in 6 Months: What's Behind the Rally?

·3 min read

Olin Corporation’s OLN shares have surged 78.1% over the past six months. The chemical maker has also outperformed its industry’s rise of 11.9% over the same time frame. Moreover, it has topped the S&P 500’s 14.6% rise over the same period.

Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Working in OLN’s Favor?

Olin is benefiting from Lake City U.S. Army contract, productivity actions and investment in the Information Technology (IT) project. Upbeat outlook for second-quarter 2021 has also contributed to the run-up in the company’s shares.

The company, in its first-quarter earnings call, said that it expects its recent price hike announcements for chlorine, epichlorohydrin, epoxy resins, bleach, ethylene dichloride, caustic soda and chlorinated organics to favorably contribute to its Chemicals businesses in the second quarter. Second-quarter adjusted EBITDA is projected to improve sequentially from first-quarter 2021 levels barring the net one-time financial benefits from Winter Storm Uri.

Earnings estimates for Olin have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased around 39.7% while the same for second-quarter 2021 has gone up 41.7%.

The company remains committed to improve its cost structure and efficiency and also drive productivity through a number of projects. It expects productivity measures to deliver $50-$100 million of net savings in 2021. Productivity actions are expected to positively contribute to second-quarter results.

The company also expects higher performance for its Winchester business in 2021. The Winchester segment is expected 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. The company expects the contract to increase Winchester's annual revenues by $450-$550 million.

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

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, ArcelorMittal MT and Cabot Corporation CBT.

Nucor has a projected earnings growth rate of 344.9% for the current year. The company’s shares have surged around 135% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ArcelorMittal has an expected earnings growth rate of 1,163.6% for the current fiscal. The company’s shares have surged around 188% in the past year. It currently carries a Zacks Rank #1.

Cabot has an expected earnings growth rate of around 137.5% for the current fiscal. The company’s shares have rallied 60% in the past year. It currently carries a Zacks Rank #1.

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