On Monday, RBC (TSX:RY) Capital adjusted its financial outlook for Oiln (NYSE: OLN) stock, reducing the price target to $52.00 from the previous $61.00, while keeping an Outperform rating.
The revision comes after Oiln reported a slight miss in its second-quarter performance and anticipates a $100 million impact from Beryl in the third quarter, as well as a dimmer forecast for chlor-alkali demand. These factors have tempered the expectations for a strong earnings recovery in the second half of the year.
The analyst from RBC Capital noted that the recovery in the Epoxy sector appears to be further away, contingent upon tariffs, but suggested that rate cuts could potentially aid in the recovery of Building and Construction (B&C) demand by 2025. Oiln, with its significant leverage to recovery, is expected to benefit from these improvements in demand.
Due to these updated projections, RBC Capital has revised its EBITDA estimates for Oiln downward for the third quarter of 2024, the full year of 2024, and 2025. The new estimates are set at $170 million for the third quarter, $940 million for the full year of 2024, and $1.20 billion for 2025. These figures have been adjusted from the previous estimates of $340 million, $1.19 billion, and $1.40 billion, respectively.
The price target has been set based on a higher multiple of 7.0 times, up from 6.5 times, reflecting the trough earnings levels. This adjustment in valuation reflects the challenges faced by Oiln in the near term, while still acknowledging the potential for recovery in the medium to long term.
In other recent news, Olin (NYSE:OLN) Corporation has been navigating operational challenges due to Hurricane Beryl's impact on its Freeport, Texas facility. The company is currently under Force Majeure for its Chlor Alkali Products & Vinyls (CAP&V) and Aromatics shipments, primarily affecting its Vinyl Chloride Monomer (VCM) and acetone/phenol assets. This situation is estimated to result in an approximate $100 million hit to its EBITDA in the third quarter of 2024.
In response to these challenges, Citi has adjusted its price target for Olin from $54 to $51, maintaining a Buy rating. Meanwhile, JPMorgan (NYSE:JPM) has upgraded Olin's stock from Neutral to Overweight, focusing on the company's strategic management of chlorine and caustic soda production, which is expected to stabilize its EBITDA at approximately $950 million for 2024.
In addition, the European Commission has initiated an anti-dumping investigation into epoxy resin imports from China, Korea, Taiwan, and Thailand, following a complaint by the Ad Hoc Coalition of Epoxy Resin Producers, which includes Olin. Lastly, Olin has appointed Deon Carter as Vice President and President of its Chlor Alkali Products & Vinyls division, a move anticipated to enhance the company's operational model.
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