Olin Corporation

Due to a series of world events, the Chlor Alkali business has been surprisingly strong in the first quarter of 2011. Olin Corporation (OLN - Snapshot Report), one of the top 5 Chlor Alkali producers in the world, is expected to grow earnings by the double digits in both 2011 and 2012. This Zacks #1 Rank (strong buy) has a PEG ratio of just 0.6.

Olin operates 2 business segments: Chlor Alkali Products and Winchester.

In the Chlor Alkali segment, it manufactures chlorine and caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen,potassium hydroxide and bleach products. The Chlor Alkali business is by far Olin's largest segment.

Winchester, on the other hand, makes sporting ammunition, reloading components, small military ammunition and industrial cartridges.

Chlor Alkali Demand Jumps

Chlor Alkali demand was expected to be rather flat going into the first quarter until the Japanese earthquake changed the supply/demand equation.

Japan's exports to Australia have been impacted by the crisis. As a result, U.S. manufacturers find themselves having to export to Asia and the Pacific to meet demand.

Suddenly, Chlor Alkali manufacturers have pricing power. One major price increase has already been put through.

In addition to the Japanese impact, on Apr 20, PPG Industries (PPG - Analyst Report), another major Chlor Alkali producer, declared force majeure on North American delivery of caustic soda due to an unexpected problem with a plant in West Virginia.

While the shutdown is expected to be of short duration, it will put further strain on the already tight supply.

Olin To Report Q1 on Apr 28

On Apr 28, Olin is expected to report its first quarter results. It has a solid track record of beating the Zacks Consensus Estimate, having done so 7 straight quarters.

In the fourth quarter of 2010, the company blew by the consensus by 800%. Earnings per share were 40 cents compared to the consensus of just 5 cents.

Sales of Chlor Alkali rose 21.2% in the fourth quarter to $272.7 million from $224.9 million. Chlorine and caustic soda volumes climbed 12%.

Winchester sales fell 10.5% to $112.7 million from $126 million in the fourth quarter of 2009. The decrease was due to lower volumes and higher commodity and manufacturing costs which were only partially offset by higher pricing.

The company expected the commodities pricing pressures to continue in the first quarter.

Zacks Consensus Estimates Rise Ahead of Earnings

In the last week, the 2011 Zacks Consensus Estimate has jumped to $1.90 from $1.71 as 1 estimate was revised higher.

That is earnings growth of 65% compared to 2010.

The analysts are equally as bullish about 2012, as earnings are expected to grow another 23% to $2.33 per share.

OLN Is a Value Stock

Since the events in Japan, shares have broken out of a narrow trading range and bolted to new 1-year highs.

But there is still value to be found.

The company has a forward P/E of 13.7, well within the value cut-off I use of 15x.

It also has a price-to-book ratio of 2.5, which is easily within the 3.0 value parameter.

Additionally, shareholders are rewarded with a tasty dividend yielding 3.2%. That is higher than its direct competitors. PPG Industries yields just 2.4% and Dow Chemical (DOW - Analyst Report) yields 2.70%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

Read the full analyst report on OLN