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Olin Unit Wins US Army Deal to Run Lake City Ammunition Plant

Zacks Equity Research

Olin Corporation OLN recently announced that its ammunition unit, Olin Winchester, LLC, has been picked by the U.S. Army to manage and operate the Lake City Army Ammunition Plant in Independence, MO.

Per the company, Winchester will assume full operational control over the Lake City facility on Oct 1, 2020, subsequent to a one-year transition period. Notably, the latest contact is initially valid for seven years and may be extended up to three additional years, based on the U.S. Army’s discretion.

Winchester has been supplying ammunition to the U.S. Military since World War I. Presently, it is the largest producer of small-caliber ammunition for the U.S. Army, outside of the Lake City facility.

Notably, shares of Olin have plummeted 28.8% in the past year compared with the industry’s 37% decline.

In second-quarter 2019 earnings call, the company stated that it expects improved results from the Chlor Alkali Products and Vinyls unit in second-half 2019 on the back of seasonally higher volumes and operating rates, as well as improved cost performance. The company also expects caustic soda prices to improve as the year progresses.

For the Epoxy unit, Olin expects to see improved performance in the second half driven by higher seasonal volumes, reduced maintenance turnaround costs and resumption of normal customer operations following the re-opening of the International Terminal Company in Houston, TX.

The company expects net income within $132-$207 million for 2019. Adjusted EBITDA for the year is forecast in the band of $1,075-$1,175 million.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Agnico Eagle Mines Limited AEM and Arconic Inc ARNC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 170% for 2019. The company’s shares have surged 76.4% in the past year.

Agnico Eagle has a projected earnings growth rate of 158.6% for the current year. The company’s shares have rallied 52.8% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the current year. Its shares have moved up 9% in the past year.

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