Olin's (OLN) Shares Up 50% in 6 Months: What's Driving the Stock?
Solid second-quarter earnings performance and an upbeat outlook have contributed to the run-up in Olin's (OLN) shares.
Olin Corporation’s OLN shares have shot up 50.4% over the past six months, outperforming the industry’s rise of 7.2%. The company has also topped the S&P 500’s 14.1% rise over the same period.
Let’s dive into the factors behind this Zacks Rank #2 (Buy) stock’s price appreciation.
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What’s Favoring the Stock?
Solid second-quarter earnings performance and an upbeat outlook for the third quarter have contributed to the run-up in Olin’s shares. Olin’s adjusted earnings of $1.73 per share for the second quarter topped the Zacks Consensus Estimate of $1.45. Revenues shot up 79% year over year to $2,221.3 million and also surpassed the Zacks Consensus Estimate of $2,052.2 million. The company saw strong sales across all its segments in the second quarter. It benefited from higher pricing and volumes in the quarter.
Olin, 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 company 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’s Winchester segment is also poised 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.
Earnings estimates for Olin have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased 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.
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.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, ArcelorMittal MT and AdvanSix Inc. ASIX, each sporting a Zacks Rank #1 (Strong Buy). 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 171% 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 181% in the past year.
AdvanSix has an expected earnings growth rate of around 160.4% for the current year. The company’s shares have gained roughly 164% in the past year.
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