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On Thursday, JPMorgan analyst Jeffrey Zekauskas downgraded shares of Olin Corporation (NYSE:OLN), a chemical manufacturing company, from Overweight to Neutral. Accompanying this downgrade, the price target was significantly reduced from $50.00 to $28.00, as the stock trades near its 52-week low of $25.77. The revision in the price target and stock rating reflects a conservative outlook on the company’s earnings potential, joining six other analysts who have recently revised their earnings expectations downward according to InvestingPro data.
Zekauskas provided insights into the factors influencing the downgrade. He noted a lower expected contribution from Olin’s Winchester segment, which is anticipated to face margin pressures due to reduced commercial volumes stemming from destocking activities. The company’s already weak gross profit margin of 11.28% could face further pressure. While there is an expectation for margin improvements in the Epoxy business as prices improve and volumes recover, the Chlor-alkali segment is predicted to encounter higher production costs due to increased gas prices, coupled with squeezed margins from rising ethylene cash costs and declining EDC prices.
The analyst’s estimates for Olin’s future earnings before interest, taxes, depreciation, and amortization (EBITDA) were also shared. The 2025 EBITDA estimate of $837 million takes into account the aforementioned factors, slightly below the current EBITDA of $873.9 million. Looking ahead to 2026, the EBITDA estimate stands at $888 million, with projections of a stable year-over-year contribution from the Chlor-alkali segment, continued recovery in Epoxy, and modest growth in Winchester.
Furthermore, JPMorgan introduced a preliminary 2027 EBITDA projection of $937 million for Olin, which is based on anticipated recovery in the Chlor-alkali business and modest growth in both the Epoxy and Winchester segments. However, Zekauskas clarified that at this stage, they do not model any EBITDA benefit from Olin’s toll manufacturing efforts into their estimates.
The revised rating and price target suggest a more cautious stance on Olin’s stock, as the company navigates through a challenging environment with various segment-specific headwinds.
In other recent news, Olin Corporation reported robust financial results for the fourth quarter of 2024, with earnings per share (EPS) of $0.09, significantly surpassing analysts’ forecast of $0.0015. The company’s revenue also exceeded expectations, reaching $1.67 billion against a projected $1.56 billion. Despite this strong performance, Olin’s stock experienced a decline in after-hours trading, reflecting broader market concerns. In another development, BMO Capital Markets revised its price target for Olin to $34, citing expected near-term earnings challenges due to seasonal fluctuations and soft consumer spending. RBC Capital Markets downgraded Olin’s stock rating from Outperform to Sector Perform, reducing the price target to $30, citing delayed recovery in demand and tariff pressures. Meanwhile, KeyBanc Capital Markets maintained an Overweight rating on Olin, albeit lowering the price target to $40, following weaker-than-expected first-quarter guidance. Additionally, Olin announced its 393rd consecutive quarterly dividend, reaffirming its commitment to shareholder returns. These developments highlight the mixed outlook from analysts and the company’s ongoing strategic initiatives.
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