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Why Is Olin (OLN) Up 6.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Olin (OLN - Free Report) . Shares have added about 6.8% in that time frame, outperforming 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 catalysts.

Olin’s Q2 Earnings Top, Revenues Lag Estimates

Olin logged a profit of $58.6 million or 35 cents per share in second-quarter 2018 against net loss of $5.9 million or 4 cents a year ago.

Barring one-time items, earnings came in at 54 cents per share in the quarter, beating the Zacks Consensus Estimate of 39 cents.

Revenues rose roughly 13% year over year to $1,728.4 million, missing the Zacks Consensus Estimate of $1,773 million.

Segment Review

Chlor Alkali Products and Vinyls: Revenues at the division increased 18% year over year to $1,018.7 million in the second quarter, mainly on the back of higher chlorine, caustic soda and other chlorine-derivatives pricing and increased volumes, partly offset by lower ethylene dichloride pricing. Caustic soda prices increased roughly 5% in the second quarter compared with the first quarter.

Epoxy: Revenues at the division went up around 11% year over year to $543.8 million, mainly backed by higher product prices.

Winchester: Revenues at the division declined around 2% year over year to $165.9 million, mainly due to lower sales to commercial customers, partly offset by higher military sales.

Financials

Olin ended the second quarter with cash and cash equivalents of $144.2 million, down around 22% year over year. The company repaid $80.1 million of outstanding debt using available cash during the first half. Long-term debt was $3,512.6 million at the end of the reported quarter compared with $3,518.9 million a year ago.

Olin repurchased roughly 0.3 million shares of common stock for $9.1 million in the quarter.

Outlook

Olin expects domestic caustic soda prices to increase further in the third quarter. Steady growth in global demand, chlor alkali capacity reduction across North America, Europe and China over the last two years and minimal capacity addition supports the continued caustic soda cycle, per the company.  The company has also raised the adjusted EBITDA forecast for 2018 to $1.3 billion (+/- 4%, considering upside opportunities and downside risks). According to the company, the favorable supply and demand dynamics in the Epoxy resin markets have provided a constructive near-term outlook for its Epoxy business. However, it expects higher propylene costs to pose a challenge in the second half of 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.11% due to these changes.

VGM Scores

Currently, Olin has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Olin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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