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Olin (OLN) Down 7.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Olin (OLN - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Olin due for a breakout? 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 drivers.

Olin Misses Earnings and Revenue Estimates in Q4

Olin logged a profit of $53.3 million or 32 cents per share in fourth-quarter 2018, down significantly from a profit of $489.3 million or $2.89 per share a year ago. Earnings fell short of the Zacks Consensus Estimate of 34 cents. Earnings in the year-ago quarter included a tax benefit of $437.9 million.

The company’s revenues edged up 0.9% year over year to $1,635 million in the quarter, missing the Zacks Consensus Estimate of $1,706 million.

FY18 Results

For 2018, profit was $327.9 million or $1.95 per share, down roughly 40% from $549.5 million or $3.26 per share in 2017.

Adjusted EBITDA for the full year was record $1,265.4 million, up around 34% year over year.

Revenues for the year went up around 11% year over year to $6,946.1 million.

Segment Review

Chlor Alkali Products and Vinyls: Revenues at the division rose around 7% year over year to $980.8 million in the fourth quarter, mainly due to higher chlorine, ethylene dichloride and other chlorine-derivatives prices that more than offset lower volumes.

Epoxy: Revenues at the division went down around 5% year over year to $508.7 million, hurt by lower cumene and resin volumes that more than offset higher product prices.

Winchester: Revenues at the division declined around 12% year over year to $145.5 million, mainly due to reduced shipments to commercial customers.

Financials

Olin ended 2018 with cash and cash equivalents of $178.8 million, down around 18% year over year. The company repaid $122 million of debt using its cash flow during the fourth quarter. Long-term debt was $3,104.4 million at the end of 2018, down 14% year over year.

Outlook

Moving ahead, Olin forecasts adjusted EBITDA for 2019 to be comparable to 2018 levels considering a balanced level of upside potential and downside risks. The company also expects 2019 to be another strong year of cash flow generation.

Olin started the year with caustic soda prices meaningfully lower than 2018. However, it expects this to be offset by better chlorine, ethylene dichloride and chlorine-derivatives prices and a decline in turnaround costs.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Olin has a nice Growth Score of B, 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 this revision looks promising. 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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