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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 37% over the past six months. It is benefiting 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 341.8% over the past year against the 30.4% rise of its industry. It has also outperformed the S&P 500’s roughly 30.4% rise over the same period.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Estimates Going Up

Over the past two months, the Zacks Consensus Estimate for Olin for 2021 has increased around 21.2%. The consensus estimate for third-quarter 2021 has also been revised 44% 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 $6.62, reflecting an expected year-over-year growth of 590.4%. Moreover, earnings are expected to register a 1,115% growth in third-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 4.79, cheaper compared with the industry average of 10.31.

Upbeat Prospects

Olin delivered solid results in the second quarter with both adjusted earnings and revenues topping the respective Zacks Consensus Estimate. The company saw strong sales across all its segments in the second quarter. It benefited from higher pricing and volumes in the quarter.

The company, in its second-quarter call, said that it anticipates Chlor Alkali Products and Vinyls, Epoxy, and Winchester segments’ third-quarter results to increase sequentially. Moreover, it expects third-quarter 2021 adjusted EBITDA to improve sequentially from second-quarter 2021 levels.

The Winchester segment is well-placed 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. Notably, sales from the segment more than doubled year over year in the second quarter, driven by higher commercial and military sales as well as higher commercial ammunition pricing. The company expects the Lake City contract to increase Winchester's annual revenues by $450-$550 million.  

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 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.

 

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 Nucor Corporation (NUE - Free Report) , ArcelorMittal (MT - Free Report) and AdvanSix Inc. (ASIX - Free Report) , each sporting 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 489.2% for the current year. The company’s shares have surged around 163% in a year.

ArcelorMittal has an expected earnings growth rate of 1,731.2% for the current year. The company’s shares have shot up around 189% in the past year.

AdvanSix has an expected earnings growth rate of around 160.4% for the current year. The company’s shares have rallied roughly 155% in the past year.

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