On Tuesday, KeyBanc Capital Markets reiterated its Overweight rating on shares of Olin Corporation (NYSE: NYSE:OLN), with a price target of $56.00. The stock, currently trading near its 52-week low at $33.15, has analyst targets ranging from $38 to $57, according to InvestingPro data.
The affirmation comes after Chemical Market Analytics (CMA) released its monthly chlor-alkali report on December 30, which indicated that caustic soda prices were holding up better than anticipated. According to the report, the U.S. caustic soda index dropped by $5 per ton month-over-month in December, which was a smaller decline than the $10 per ton decrease that had been projected.
KeyBanc's analysis suggests that the findings from the CMA report bolster a positive outlook for the chlor-alkali market. While there are concerns about the long-term sustainability of chlorine prices due to recent capacity additions, KeyBanc believes that the potential for a cyclical volume recovery in the U.S. chlorine and caustic soda market outweighs these risks. InvestingPro analysis reveals that Olin maintains strong operational efficiency with a current ratio of 1.4 and has maintained dividend payments for an impressive 51 consecutive years.
Olin Corporation's strategy to navigate potential challenges includes moving downstream into polyvinyl chloride (PVC) production through its partnership with Kem One, along with other similar transactions in progress. KeyBanc pointed out that with industry operating rates currently in the high-70% range and Olin operating at 55-60%, the company is well-positioned to benefit from strong operating leverage during a market upswing.
Demand is expected to remain strong for caustic soda through the first half of 2025, with a forecasted rebound in chlorine demand potentially lifting utilization rates in the second half of 2025 and into 2026. Olin is KeyBanc's top pick within the commodity chemicals sector, underscored by an attractive valuation; the stock is trading at approximately 6.1 times KeyBanc's projected 2025 EBITDA.
The company currently generates a strong free cash flow yield of 15%, and InvestingPro analysis indicates the stock is currently undervalued. Subscribers can access 13 additional ProTips and a comprehensive Pro Research Report for deeper insights into Olin's financial health and growth potential.
In other recent news, Olin Corporation, a chemical manufacturing company, has seen significant changes in its financial outlook and leadership structure. Mizuho (NYSE:MFG) recently revised its earnings estimates for Olin, lowering its price target to $38.00 from $45.00, while maintaining a neutral rating on the stock. This adjustment was driven by challenging market conditions and the expected reduction in earnings. Despite this, Olin has announced a mid-cycle EBITDA target of $2 billion over the next five years, a substantial increase from the estimated $855 million for 2024.
The company has also expanded its share repurchase program to $2 billion, allowing for the periodic repurchase of its common stock. This decision was made public during Olin's 2024 Investor Day, showcasing the company's commitment to delivering shareholder value. The specifics of this buyback will be determined by management, considering various business and market factors.
In terms of leadership, Olin will see Senior Vice President and Chief Legal Officer, Dana O’Brien, retire with Angela M. Castle set to succeed her. This follows an amendment to O’Brien's retention agreement, ensuring a smooth transition for her successor.
Olin’s earnings for the second half of 2024 were weaker than expected due to hurricane-related disruptions. However, the company's chemical segment exceeded expectations due to an increase in caustic soda prices. Lastly, the company could face additional competition as The Chemours Company (NYSE:CC) announced plans to construct a chlor-alkali production facility.
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