O-I Glass, Inc. OI is gaining from forecast-topping first-quarter 2021 results. Growing preference for glass packaging, focus on innovation, capacity expansions, joint-venture deals and acquisitions are driving growth. Further, turnaround initiatives and cost-control measures will aid the company.
Currently, this manufacturer of glass containers carries a Zacks Rank #3 (Hold) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings & Sales Top Q1 Estimates
O-I Glass reported first-quarter 2021 adjusted earnings of 35 cents per share, beating the Zacks Consensus Estimate of 28 cents and came within management’s guidance of earnings between 32 cents and 37 cents. Revenues of $1500 million also surpassed the Consensus Mark of $1,460 million.
The company has a trailing four-quarter average earnings surprise of 29.7%.
Shares of the company have appreciated 51.4% over the past three months, outperforming the industry’s growth of 1.8%.
Return on Equity (ROE)
O-I Glass’ trailing 12-month ROE supports its growth potential. The company’s ROE of 76.7% compares favorably with the industry’s average ROE of 33.8%, reflecting that it is more efficient in utilizing shareholders’ funds.
Growth Drivers in Place
Given customers’ increasing preference for sustainable glass packaging solutions and improved consumption trends, O-I Glass projects adjusted earnings per share for 2021 to lie between $1.55 and $1.75. The mid-point of the guided range indicates a year-over-year improvement of 35%. Given the steady demand trend, sales and production volume will likely register double-digit growth compared to prior-year levels. The company is gaining from the elevated off-premise sales, while on-premise consumption is anticipated to recover. Total consumption is likely to increase modestly, given the changing market dynamics and heightened social activity post pandemic.
The company’s top priority remains investments in business. It intends to achieve this by investing in joint ventures (JVs) and incremental capacity, and through bolt-on acquisitions in emerging geographies, while delivering a solid return on invested capital.
Last month, management announced its plan to invest roughly $75 million in an expansion at its Zipaquirá, Colombia facility, in order to meet the heightening demand for highly sustainable glass packaging. Notably, the facility will be one of O-I Glass’ largest and cost-effective plants.
O-I Glass is driving innovation in the glass segment. Its glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate the company’s furnaces.
Last year, the company divested its Australia and New Zealand (ANZ) glass manufacturing business to Visy Industries. Following the sale, O-I Glass continues to strengthen its leading market position across Europe and the Americas, and develop interests in Asia.
The company is committed to deliver margin expansion through improving productivity, operating performance and cost reduction, and anticipates benefits of around $50 million from these actions. It is focused on reducing debt and optimizing its portfolio with a strategic divestiture program. These moves will generate solid growth, higher margins, enhance business portfolio and strengthen the balance sheet.
Few Headwinds to Counter
The resurgence of coronavirus cases might impact the economic recovery unfavorably. Hence, uncertainty related to the severity of the pandemic and governmental authorities’ actions to contain the virus might affect the O-I Glass’ current-year performance. Moreover, input cost inflation might unfavorably impact the company’s margins.
Investors might want to hold on to the stock, at present, as it has ample positive prospects of outperforming peers in the near future.
Stocks to Consider
Better-ranked stocks in the Industrial Products sector include AGCO Corporation AGCO, Avery Dennison Corporation AVY and Caterpillar Inc. CAT, each carrying a Zacks Rank #2 at present.
AGCO Corporation has a projected earnings growth rate of 54.6% for the current year. Shares of the company have soared 217% over the past year.
Avery Dennison has an estimated earnings growth rate of 20.8% for 2021. The company’s shares have rallied 112% in a year’s time.
Caterpillar has an expected earnings growth rate of 45.6% for the ongoing year. Over the past year, the stock has appreciated 131%.
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