Why Olin Stock Crashed Today

Olin (NYSE: OLN) stock crashed an unlucky 13.7% through 10:30 a.m. ET Tuesday after missing slightly on its revenue report last night -- but crushing on earnings.

Heading into the report, analysts expected Olin to earn only $0.09 per share, but the chemicals and ammunition company actually earned $0.37 per share. Only on revenue did Olin come up short, reporting quarterly sales of $1.71 billion -- not the $1.73 billion expected.

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Olin Q3 earnings

Did that tiny slip-up justify today's over-decimation of Olin stock?

Digging into the details, we find that Olin grew its sales 7.7% in Q3, bringing total sales year to date to $5.1 billion, up only 5% year over year. Thus, it seems sales may have missed expectations -- but the sales growth rate is still accelerating.

I'd actually call that good news, and combined with the fact that Olin reported positive earnings (after losing money in last year's Q3), and indeed, stronger earnings than expected, potentially great news.

Is Olin stock a buy?

Still, CEO Ken Lane described current market conditions as "persistently challenging," citing "headwinds ... from subsidized Asian material flowing into the United States and European epoxy markets," as well as "elevated inventories" of commercial ammunition "amid continued lower consumer sales," both of which are weighing on results.

Management further reminded investors that the fourth quarter, currently underway, "is typically the weakest seasonal quarter for our businesses." Olin forecasts weak earnings before interest, taxes, depreciation, and amortization (EBITDA) in the range from $110 million to $130 million, and investors are punishing the stock for this.

Valued at a rich 49 times trailing earnings and facing a tough Q4, even a strong Q3 isn't enough to make Olin stock a buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.