Olin (OLN) Shares Up 21% in 6 months: What's Driving the Stock?
Zacks Investment Research | Dec 23, 2021 08:26PM ET
Olin (NYSE:OLN) Corporation’s industry ’s rise of 0.2%. The company has also topped the S&P 500’s 11.4% rise over the same period.
Let’s dive into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.
h3 What’s Driving the Stock?/h3Olin is reaping the benefits from the Lake City U.S. Army contract, productivity actions and investment in the Information Technology (IT) project. Better-than-expected earnings performance and upbeat prospects have also contributed to the rally in the company’s shares.
The company’s Chlor Alkali Products & Vinyls and Epoxy business units are benefiting from higher prices, and its Winchester segment stands to gain from the Lake City U.S. Army ammunition contract. OLN looks to pump up the annual profitability of the unit through the multi-year contract. Sales from the Winchester segment surged 94% year over year in the third quarter of 2021, on the back of higher commercial and military sales, including ammunition produced at Lake City and higher commercial ammunition pricing.
Olin looks to drive improvement in its cost structure and enhance 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.
The company is also aiming to improve its net debt to adjusted EBITDA ratio through a combination of improved adjusted EBITDA, disciplined capital spending and debt reduction by the end of 2021. For full-year 2021, it targets debt reduction of roughly $1.1 billion by using the cash generated from operations.
Olin is also focused on boosting shareholders' returns. Last month, it announced that its board approved a new $1 billion share repurchase program. It repurchased around 1.5 million shares of common stock for $68.3 million in the third quarter.
Its investment in the IT project promises cost and other benefits to the company. The project involves the implementation of necessary IT infrastructure and is expected to maximize cost-effectiveness, efficiency and control over its global chemical operations by standardizing business processes.
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Olin's earnings estimates have also been going up over the past two months. The Zacks Consensus Estimate for 2021 has increased around 19% and the same for fourth-quarter 2021 has gone up 54%. The favorable estimate revisions instill investor confidence in the stock.
h3 Key Picks/h3Some other top-ranked stocks from the basic materials space are AdvanSix (NYSE:ASIX) Inc. .
AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 47%, on average. ASIX’s shares have also surged 118.4% over a year.
Univar has an expected earnings growth rate of 55.2% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9% upward over the past 60 days.
Univar beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 24.1%, on average. UNVR’s shares have rallied 46.9% over a year.
Chemours has an expected earnings growth rate of 105.1% for the current year. The Zacks Consensus Estimate for CC’s earnings for the current year has been revised 10% upward in the past 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company delivered a trailing four-quarter earnings surprise of roughly 34.2%, on average. CC has gained 17.8% over a year.
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