Please ensure Javascript is enabled for purposes of website accessibility

Why Olin Corporation Dropped 17% Today

By Travis Hoium – Feb 3, 2016 at 1:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A disappointing earnings report has investors readjusting what to expect from Olin Corporation.

What: Shares of chemical maker Olin Corporation (OLN -1.03%) fell as much as 17% in early trading Wednesday after the company reported disappointing fourth quarter results.

So what: Sales in the quarter was $1.27 billion, which was well short of the $1.54 billion Wall Street analysts had estimated. Bottom line results were also disappointing with Olin reporting a loss of $59.3 million, or $0.37 per share, after analysts expected a $0.20 per share profit.  

To make matters worse, first quarter earnings are expected to be $0.22 to $0.32 per share, even after pulling out acquisition related costs, and analysts had been expecting earnings of $0.33 per share.

Now what: Olin's results can be volatility quarter to quarter and the acquisition of Dow's chlor alkali and other businesses. That muddied results a bit, including $84.6 million in acquisition related costs that dragged down results. Expectations for the company post merger may have been a bit too high but now that it's complete and synergies will start being realized I think the stock is in an attractive position.

Olin's enterprise value, or debt plus equity, is just 6.5 time the midpoint of $915 to $985 in EBITDA guided for 2016. That's a solid value and will give management the ability to pay down debt to reduce leverage or even increase the dividend. One quarter's earnings miss should just be a blip on the radar for Olin.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Olin Corporation Stock Quote
Olin Corporation
OLN
$46.99 (-1.03%) $0.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.