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Olin's (OLN) Shares Up 40% in 3 Months: What's Driving the Stock?

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Olin Corporation’s OLN shares have rallied 39.5% over the past three months, outperforming the industry’s rise of 8.4%. The company has also topped the S&P 500’s roughly 4.5% rise over the same period.

Let’s dive into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.

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Zacks Investment Research

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What’s Favoring the Stock?

Strong third-quarter earnings performance has contributed to the run-up in Olin’s shares. Olin’s earnings of $2.38 per share for the third quarter topped the Zacks Consensus Estimate of $2.08. Its revenues surged around 63% year over year to $2,340.1 million, driven by higher pricing. The company saw higher sales across its segments in the third quarter.

Olin’s Chlor Alkali Products & Vinyls and Epoxy segments saw strong sales in the quarter on the back of increased prices. Sales from the Winchester segment also surged 94% year over year, driven by higher commercial and military sales, including ammunition produced at Lake City as well as higher commercial ammunition pricing.

The 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.

The company also 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 aiming for an improvement in its net debt to adjusted EBITDA ratio through a combination of improved adjusted EBITDA, disciplined capital spending, and debt reduction by the end of 2021. For the full year, it is targeting debt reduction of roughly $1.1 billion by using the cash generated from operations.

Earnings estimates for Olin have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased 19.5%. The consensus estimate for fourth-quarter 2021 has also been revised 67.6% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

The Zacks Consensus Estimate for earnings for 2021 for Olin is currently pegged at $8.64, reflecting an expected year-over-year growth of 740%. Moreover, earnings are expected to register a 2,125% growth in fourth-quarter 2021.

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 Nutrien Ltd. NTR, Dow Inc. DOW and Univar Solutions Inc. UNVR, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 12.9% upward over the last 60 days.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has rallied around 53% in a year.

Dow has a projected earnings growth rate of 447% for the current year. The consensus estimate for DOW’s current year has been revised 7.2% upward over the last 60 days.

Dow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 14.1%. DOW shares have gained around 7% in a year.

Univar has a projected earnings growth rate of 55.2% for the current year. UNVR's consensus estimate for the current year has been revised 9% upward over the last 60 days.

Univar beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 24.1%. UNVR has rallied around 63% in a year.


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