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Olin (OLN) to Benefit from Financial Hedges, Ups Q1 Outlook

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Olin Corporation (OLN - Free Report) recently updated outlook for the first quarter of 2021.

The company stated that production was put to a halt at its Freeport, TX facility due to lack of electrical power, natural gas and other raw materials as a result of the winter storm Uri. All Olin operations in Freeport were affected. Moreover, production was negatively impacted at Olin’s sites in Plaquemine, LA; St. Gabriel, LA; Oxford, MS; and McIntosh, AL.

As a result, the company announced Force Majeure on all chemical product shipments from North America by Feb 18, 2021. While the facilities have resumed operation, constraints on product supply are expected to continue.

Before the financial impact of storm Uri, Olin’s adjusted EBITDA was expected to be $400-$425 million. The projection indicates an increase from fourth-quarter 2020 adjusted EBITDA of $246.2 million and first-quarter 2020 figure of $122.8 million.

Olin now projects first-quarter adjusted EBITDA in the range of $475-$500 million. This projection includes a net one-time benefit associated with Olin's customary financial hedges and contracts, maintained to provide protection from rapid and dramatic changes in energy costs. This is partly offset by unabsorbed fixed manufacturing expenses, reduced profit from lost sales and storm-related maintenance costs. The outlook for the first quarter has further upside potential related to the final settlement of these one-time items linked with the winter storm Uri.

Olin’s businesses were able to amplify its ever-evolving winning model in the first quarter of 2021. This is expected to result in an improvement in forward quarterly adjusted EBITDA from fourth-quarter 2020 levels, the company noted.

Shares of Olin have surged 301.3% in the past year compared with 118.6% rise of the industry.

Zacks Rank &Other Key Picks

Olin currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Fortescue Metals Group Limited (FSUGY - Free Report) , Ashland Global Holdings Inc. (ASH - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) .

Fortescue has a projected earnings growth rate of 107.8% for the current fiscal year. The company’s shares have surged 187.1% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Ashland has an expected earnings growth rate of 83.9% for the current fiscal year. The company’s shares have gained 122.2% in the past year. It currently sports a Zacks Rank #1.

Impala has an expected earnings growth rate of 197.6% for the current fiscal year. The company’s shares have rallied 494.7% in the past year. It currently flaunts a Zacks Rank #1.

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