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Olin (OLN) Up 1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Olin (OLN - Free Report) . Shares have added about 1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Olin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Olin's Earnings and Revenues Miss Estimates in Q2

Olin recorded a loss of $120.1 million or 76 cents per share in second-quarter 2020 against loss of $20 million or 12 cents per share a year ago.

Excluding one-time items, adjusted loss for the quarter was 63 cents per share, wider than the Zacks Consensus Estimate of a loss of 49 cents.

The company’s revenues fell 22% year over year to $1,241.2 million in the quarter. It also lagged the Zacks Consensus Estimate of $1,268.4 million. Weaker demand hurt sales across Chlor Alkali Products & Vinyls and Epoxy segments in the quarter.

Segment Review

Chlor Alkali Products and Vinyls: Revenues at the division fell roughly 28% year over year to $651.2 million in the reported quarter on reduced volumes and lower caustic soda and ethylene dichloride pricing.

Epoxy: Revenues at the division dropped around 23% year over year to $397.4 million on reduced epoxy resin volumes and lower product prices.

Winchester: Revenues rose around 17% year over year to $192.6 million on increased commercial ammunition sales.

Financials

Olin ended the quarter with cash and cash equivalents of $237.9 million, up roughly 87% year over year. Long-term debt was $4,073.9 million at the end of the quarter, up around 26% year over year.

Outlook

Moving ahead, the company said that Chlor Alkali Products & Vinyls and Epoxy units remain challenged amid the current economic conditions and visibility around future demand remains limited.  

Olin envisions adjusted EBITDA for the third quarter to be more than double second-quarter levels on improved sales volumes, reduced maintenance turnaround costs and higher product pricing.  

The company also expects the U.S. Army Lake City contract to increase Winchester's annual revenues by $450-$550 million. Moreover, it anticipates commercial ammunition demand to continue to increase through the balance of 2020.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -162.86% due to these changes.

VGM Scores

At this time, Olin has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Olin has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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