KeyBanc analysts revised the price target for Olin Corporation (NYSE:OLN), lowering it to $62 from $69 while maintaining an Overweight rating on the stock.
The analysts highlighted that Olin has faced a challenging but necessary reassessment, acknowledging that the second half of 2024 does not appear more promising than the first half. The analysts view the new EBITDA guidance of approximately $940 million ($1,040 million excluding the impact of Hurricane Beryl) as attainable and consider this an attractive level of trough earnings for 2024. The underlying run-rate EBITDA, without significant demand improvement, suggests a rate of around $1.2 billion for 2025, with potential additional support from market recovery.
Encouragingly, Olin expects the $100 million impact from Hurricane Beryl to be confined to the third quarter, with asset restarts planned for August. Positive momentum in the U.S. caustic soda and epoxy markets, along with stable chlorine prices, further supports the favorable outlook for Olin shares. While Winchester demand remains robust, it is experiencing higher costs due to propellant shortages.
The guidance reset was a significant uncertainty for investors, who were concerned that the new CEO had not adjusted expectations in the previous call. However, the analysts credit management for setting realistic trough level expectations, even if slightly delayed. They believe Olin has substantial upside potential within his coverage universe at this point and reiterate an Overweight rating, despite trimming the price target due to a softer earnings forecast for both 2024 and 2025.