Olin (OLN) to Report Q1 Earnings: What's in the Offing?
Olin Corporation OLN is set to release first-quarter 2021 results after market close on Apr 27. The company’s productivity actions and strong performance in its Winchester business are likely to get reflected in its first-quarter results. Benefits associated with financial hedges are also likely to have supported the bottom line. However, it is likely to have faced headwinds stemming from disruptions associated with the winter storm Uri and muted demand across certain key markets.
The company beat the Zacks Consensus Estimate for earnings in one of the last four quarters. It has a negative trailing four-quarter earnings surprise of roughly 29.4%, on average. The company reported a negative earnings surprise of 50% in the last reported quarter.
Olin’s shares have surged 197% in the past year compared with 76.7% rise of the industry.
Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
The company, last month, raised its outlook for the first quarter. It now projects first-quarter adjusted EBITDA in the range of $475-$500 million, higher than $400-$425 million expected earlier.
The Zacks Consensus Estimate for Olin’s revenues in the to-be-reported quarter is pegged at $1,891 million, which suggests a year-over-year increase of 32.7%.
The consensus mark for net sales in the Chlor Alkali Products and Vinyls unit is currently pegged at $929 million for the first quarter, which calls for a 22.2% year-over-year increase.
Moreover, the Zacks Consensus Estimate for the Winchester segment’s net sales is currently pegged at $377 million that suggests a 100.5% rise from the year-ago quarter’s level. The same for the Epoxy division is pegged at $545 million, which suggests a 14.26% year-over-year increase.
Factors at Play in Q1
Olin is likely to have gained from its productivity actions and the Lake City U.S. Army contract. It is committed toward improving its cost structure, efficiency and driving productivity.
The company expects productivity measures to deliver $50-$100 million of net savings in 2021. It is also likely to have benefited from price hikes for chlorine, epichlorohydrin, epoxy resins, bleach, ethylene dichloride and chlorinated organics in the March quarter. The benefits associated with Olin's customary financial hedges and contracts, maintained to provide protection from rapid and dramatic changes in energy costs, are also likely to get reflected on first-quarter results.
Moreover, the company is likely to have gained from higher performance for its Winchester business on the back of the Lake City U.S. Army ammunition contract. The multi-year contract is expected to have boosted sales and profitability of the unit in the first quarter. The company expects the contract to increase Winchester's annual revenues by $450-$550 million.
However, lower profit from lost sales and maintenance costs related to the winter storm Uri are likely to have hurt Olin’s first-quarter performance. The company, last month, stated that production was put to a halt at its Freeport, TX facility due to lack of electrical power, natural gas and other raw materials as a result of Uri. All Olin operations in Freeport were affected. Moreover, production was negatively impacted at Olin’s sites in Plaquemine, LA; St. Gabriel, LA; Oxford, MS; and McIntosh, AL. As a result, the company announced Force Majeure on all chemical product shipments from North America by Feb 18, 2021.
The company is also expected to have faced headwinds from muted demand across certain key markets. Volumes are likely to have been impacted in the first quarter due to non-participation in certain markets.
Olin Corporation Price and EPS Surprise
Olin Corporation price-eps-surprise | Olin Corporation Quote
Zacks Model
Our proven model does not conclusively predict an earnings beat for Olin this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Earnings ESP: Earnings ESP for Olin is -1.49%. The Zacks Consensus Estimate for earnings for the first quarter is currently pegged at $1.34. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Olin currently carries a Zacks Rank #1.
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Dow Inc. DOW, scheduled to release earnings on Apr 22, has an Earnings ESP of +0.35% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
AdvanSix Inc. ASIX, scheduled to release earnings on Apr 30, has an Earnings ESP of +7.69% and carries a Zacks Rank #1.
The Mosaic Company MOS, scheduled to release earnings on May 3, has an Earnings ESP of +3.06% and a Zacks Rank #3.
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