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On Wednesday, Mizuho (NYSE:MFG) adjusted its outlook on Oiln (NYSE: OLN), a chemical manufacturing company, by reducing its price target to $38.00 from the previous $45.00. The firm has decided to maintain a Neutral rating on the stock. According to InvestingPro analysis, the stock appears undervalued at current levels, with technical indicators suggesting oversold conditions.
The adjustment follows Oiln's recent Investor Day announcements, where the company targeted a mid-cycle Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2 billion over the next five years, a notable increase from the approximately $855 million expected for 2024.
Oiln's forecast for December 2024 quarter's EBITDA is around $170 million, which is at the lower end of their previous guidance range of $170-200 million. The company has expressed confidence that chemical earnings are currently at a cyclical low and that Winchester, its ammunition segment, is close to completing channel destocking.
InvestingPro data shows the company maintains a healthy free cash flow yield of 14% and has consistently paid dividends for 51 consecutive years. Oiln has cited over $250 million in improvements from self-help and cost-saving actions, including completed contract enhancements with Dow, its largest customer.
Despite these improvements, Mizuho has revised its earnings estimates downward for Oiln, citing ongoing challenging market conditions. The new price target also reflects lower market multiples, as indicated by the materials index, and the anticipated reduction in earnings.
The stock is currently trading near its 52-week low of $34.84, with InvestingPro identifying multiple additional growth catalysts among its 10+ investment tips for the company. The firm's analyst noted that while there is potential for upside if the market moves beyond the mid-cycle earlier than expected, there is also a risk of downside if the mid-cycle is delayed. The target does not factor in several growth options that the company may pursue.
In other recent news, Olin (NYSE:OLN) Corporation has increased its share repurchase program to $2 billion, as announced during its 2024 investors day. The new program, known as the "2024 Share Repurchase Program," allows for the periodic repurchase of the company's common stock. It's important to note that this program does not set a mandatory purchase requirement for the company's shares.
In other developments, Olin Corporation has experienced leadership changes with Dana O’Brien, Senior Vice President and Chief Legal Officer, announcing her retirement, and Angela M. Castle set to succeed her. The company has also faced weaker than expected earnings for the second half of 2024, primarily due to hurricane-related disruptions.
Despite these challenges, Olin's chemical segment exceeded expectations due to an increase in caustic soda prices. Analysts from firms such as Piper Sandler, RBC Capital, and KeyBanc Capital Markets have revised their price targets for Olin, attributing the adjustments to a lower earnings forecast for 2025.
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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