According to a Wall Street Journal report, the Ukraine-Russia war has started raising concerns over the fast depletion of American stockpiles of ammunition. U.S. officials are of the opinion that the country’s arsenal should be replenished quickly. This brings our focus to one of the leading producers and distributors of ammunition in the United States, Olin Corporation (NYSE:OLN). With solid demand prospects and strong fundamentals, OLN seems like a good choice for investors.
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In addition to ammunition, this Missouri-based company makes and distributes chemical products for its industrial, wholesale, and retail customers in Europe, the U.S., and internationally.
Is OLN Stock a Buy?
On TipRanks, the $8.2-billion company enjoys a Strong Buy consensus rating, which mirrors analysts’ optimism for the stock. Out of 11 analysts tracked by TipRanks, nine analysts have a Buy rating on OLN stock, while two recommend a Hold rating.
OLN’s average price forecast is $71, which reflects upside potential of 26.9% from the current level. The highest price forecast for the stock is $102 and the lowest is $57. It is worth noting that Olin shares have increased 10.7% in the past year.
Now, let’s see the factors that are boosting the company’s investment appeal.
Factors Influencing Olin’s Growth Prospects
The long-term prospects of Olin appear bright. As discussed above, depleting stockpiles of ammunition in the United States, due to the help extended to Ukraine, are likely to boost demand for Olin Corporation and other players in the field.
It is worth noting that Olin has expertise in manufacturing small caliber military ammunition, reloading components, sporting ammunition, and industrial cartridges. The company carries out its ammunition business through the Winchester segment. In the first six months of 2022, Olin’s Winchester revenues totaled $866.6 million, up 9.3% year-over-year.
In addition to the ammunition business, the company’s strong foothold in the chemical market is a boon. Further, Olin Corporation’s solid balance sheet and cash position (with cash and cash equivalents of $304.6 million at the end of the first half of 2022) have supported its shareholder-friendly policies.
During the first half of 2022, the company used $103.9 million in capital expenditures and $115.5 million to repay debts. Further, Olin rewarded its shareholders with $689.7 million of share buybacks and $60.9 million of dividends. Exiting the first half of 2022, the company was left to buy back $362.5 million shares under its 2021 share repurchase authorization and $2 billion under its 2022 buyback program.
In July, Olin’s Chairman, President, and CEO, Scott Sutton, said that the $2 billion repurchase program “reflects our Board of Directors’ confidence in Olin’s future earnings and cash flow generation.”
At this juncture, it is worth mentioning that the company is suffering from macroeconomic challenges, high raw material, power, and natural gas costs, and low operating rates. For the third quarter of 2022, the company forecasts sequentially lower results for its Chemical and Winchester businesses. Also, it expects adjusted earnings before interest, tax, depreciation, and amortization to decline 15% sequentially.
Hedge Funds and Retail Investors Are Positive about Olin Stock
Per TipRanks, hedge funds have a Very Positive stance on OLN. They have purchased 730.4 thousand shares of OLN in the last quarter.
Further, retail investors are also Very Positive about the stock. In the last 30 days, retail investors have increased their holdings in Olin by 9.8%. Notably, top portfolios with exposure to the stock have grown 20.6% in the past month.
Key Takeaways for Olin’s Investors
Despite facing near-term hurdles, Olin Corporation seems to be a well-rooted company in its field. The company’s growth story is evident from the price trajectory visible in the chart below.
Also, the optimism of analysts, retail investors, and hedge funds over the company is encouraging. A solid demand environment is likely to be created as the U.S. starts refilling its ammunition stock. This would also prove to be a major top-line driver for the company. The aforementioned discussion and the company’s Smart Score of 9 (mirroring its potential to outperform the broader market) could make the stock an attractive Buy for investors.
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