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Why You Should Add Olin (OLN) Stock to Your Portfolio Now

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Olin Corporation’s (OLN - Free Report) shares have shot up around 35% over the past three months. It is gaining from the Lake City U.S. Army contract, productivity actions and investment in the Information Technology (IT) project. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Olin has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.

Let’s take a look into the factors that make this chemical maker a compelling choice for investors right now.

An Outperformer

Shares of Olin have surged 99.8% over the past six months against the 20% rise of its industry. It has also outperformed the S&P 500’s roughly 16.5% rise over the same period.


Zacks Investment ResearchImage Source: Zacks Investment Research


Estimates Going Up

Over the past two months, the Zacks Consensus Estimate for Olin for 2021 has increased around 39.7%. The consensus estimate for second-quarter 2021 has also been revised 41.7% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Solid Growth Prospects

The Zacks Consensus Estimate for earnings for 2021 for Olin is currently pegged at $5.49, reflecting an expected year-over-year growth of 506.7%. Moreover, earnings are expected to register a 315.9% growth in second-quarter 2021.

Valuation Looks Attractive

Olin’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Olin is currently trading at trailing 12-month EV/EBITDA multiple of 6.57, cheaper compared with the industry average of 12.24.

Upbeat Prospects

Olin, in its first-quarter earnings call, said that it expects its recent price hike announcements for chlorine, epichlorohydrin, epoxy resins, bleach, ethylene dichloride, caustic soda and chlorinated organics to favorably contribute to its Chemicals businesses in the second quarter.

The company also expects higher performance for its Winchester business in 2021. The Winchester segment is expected 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 expects the contract to increase Winchester's annual revenues by $450-$550 million.  

Olin is also expected to gain from cost and other benefits from its investment in the IT project. The project, which involves implementation of necessary IT infrastructure, is expected to maximize cost effectiveness, efficiency and control over its global chemical operations by standardizing business processes.

The company also remains committed to improve its cost structure and efficiency and also drive productivity through a number of projects. It expects productivity measures to deliver $50-$100 million of net savings in 2021.


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 Univar Solutions Inc. (UNVR - Free Report) , Nucor Corporation (NUE - Free Report) and Cabot Corporation (CBT - Free Report) .

Univar has a projected earnings growth rate of roughly 35.2% for the current year. The company’s shares have rallied around 53% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of 259.9% for the current year. The company’s shares have surged around 130% in a year. It currently sports a Zacks Rank #1.

Cabot has an expected earnings growth rate of around 126% for the current fiscal. The company’s shares have shot up 60% in the past year. It currently carries a Zacks Rank #2.

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