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Olin (OLN) Up 7.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Olin (OLN - Free Report) . Shares have added about 7.5% 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 Surpasses Earnings & Revenue Estimates in Q3

Olin logged a profit of $195.1 million or $1.16 per share in third-quarter 2018, up from to a profit of $52.7 million or 31 cents a year ago.

Barring one-time items, earnings came in at 75 cents per share in the quarter, beating the Zacks Consensus Estimate of 74 cents.

Revenues rose roughly 20.4% year over year to $1,872.4 million, beating the Zacks Consensus Estimate of $1,844 million.

Segment Review

Chlor Alkali Products and Vinyls: Revenues at the division increased 19.3% year over year to $1,051.1 million in the third quarter, mainly on the back of higher chlorine, caustic soda, ethylene dichloride and other chlorine-derivatives pricing, partly offset by higher raw material and freight costs.
 
Epoxy: Revenues at the division went up around 32.1% year over year to $647.3 million, mainly buoyed by higher product prices and volumes, partly marred by higher raw material costs.

Winchester: Revenues at the division declined around 5.3% year over year to $174 million, mainly due to lower sales to commercial customers.

Financials

Olin ended the third quarter with cash and cash equivalents of $156.7 million, down around 38.7% year over year. The company repaid around $250 million of outstanding debt using available cash during the first nine months of 2018. Long-term debt was $3,336.4 million at the end of the reported quarter compared with $3,663.5 million a year ago.

Olin repurchased roughly 0.5 million shares of common stock for $16.8 million in the quarter.

Outlook

Olin forecasts a decline in adjusted EBITDA from the third quarter due to seasonally weaker demand for epoxy resins, chlorine derivatives and commercial ammunition, lower caustic soda prices and higher ethylene costs resulting from increased ethane prices. The company anticipates adjusted EBITDA for 2018 to be around $1.26 billion (+/- 2%, considering upside opportunities and downside risks).

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 -32.41% due to these changes.

VGM Scores

Currently, Olin has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

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 #4 (Sell). We expect a below average return from the stock in the next few months.




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