Why Olin Shares Dropped

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What: Shares of chemical and ammunition maker Olin were backfiring today, falling as much as 11% after the company reported quarterly earnings.

So what: On its face, the quarter looked good. Net income jumped 85% to $34.6 million, driven by the Winchester firearms segment, and EPS of $0.43 beat estimates of $0.35. Revenue also grew 32% to $588 million, again beating estimates, but there were weaknesses in the company as Chlor Alkali sales were flat, in part because of "seasonally weak demand." Because of lower volumes and prices in that segment, Olin expects net income from Chlor Alkali products to decline in Q1 2013, with EPS guidance for the first quarter at just $0.40-$0.45, well below estimates of $0.56.

Now what: Unfortunately for investors, weak guidance tends to trump strong quarters. Still, the company expects Winchester sales to remain strong as the gun-control debate continues to swirl and drive heighten consumption. While today's setback seems deserved, there doesn't seem to be any long-term threat here. Olin has been around for more than 100 years, trades at a reasonable valuation, and pays a solid dividend yield at 3.6%. The stock rebounded somewhat from its opening price, and I'd expect it to stabilize here.

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The article Why Olin Shares Dropped originally appeared on Fool.com.

Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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