O-I Glass, Inc. OI is poised to gain on the growing global preference for glass as the healthy, premium and sustainable packaging option for food and beverage. The company’s investment in incremental capacity to capitalize on this trend will fuel growth. Its ongoing divestiture program, acquisitions, and product innovation are likely to act as key catalysts. The company’s cost-control measures, and efforts to improve productivity and efficiency will boost margins.
The company currently has a Zacks Rank #3 (Hold) and a VGM Score of A. 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.
Shares of the company have decreased 9.6% over the past year, against the industry’s decline of 39.5%.
Let’s delve deeper into the factors that make the O-I Glass worth holding on to at the moment.
Solid Q3 Earnings Performance
O-I Glass reported third-quarter 2021 adjusted earnings of 58 cents per share, up 41% from the prior-year quarter. The improvement can be attributed to higher selling prices and continued solid operating and cost performance supported by the company’s Margin Expansion initiatives.
The bottom line surpassed the Zacks Consensus Estimate of 52 cents. O-I Glass has beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 17.3%.
Upbeat Outlook for 2021
O-I Glass now projects adjusted earnings per share between $1.77 and $1.82 for the current year, up from its prior guidance of $1.70 to $1.75. The mid-point of the range indicates an improvement of 47% from adjusted earnings per share of $1.22 in 2020. Higher selling prices, benefits from its margin expansion initiatives, improving productivity, and cost management will drive earnings.
Superior Return on Equity (ROE)
O-I Glass’ trailing 12-month ROE supports its growth potential. The company’s ROE of 69.4% is much higher than the industry’s average ROE of 42.2%, reflecting that it is more efficient in utilizing shareholders’ funds.
Upbeat Growth Projections
The Zacks Consensus Estimate for fiscal 2021 earnings per share is currently pegged at $1.81, indicating growth of 48% from the prior year. The same for fiscal 2022 stands at $1.94, suggesting year-over-year improvement of 7%. The stock has an estimated long-term earnings growth rate of 18.9%.
Growth Drivers in Place
Demand for glass packaging has surged given its recyclability, and being a healthier and safer alternative to plastic packaging. O-I Glass is thus investing in incremental capacity, joint ventures and acquisitions in emerging geographies to capitalize on this trend.
Per its ongoing divestiture program, which is aimed at optimizing structure, O-I Glass has completed or entered into agreements for assets sales worth $1 billion to date. The company recently announced its intention to sell its Le Parfait brand and business in France. The proceeds have been used to reduce debt and improve financial flexibility. The company had around $2.1 billion of total committed liquidity at the end of the third quarter of 2021. Net debt was $4.3 billion as of the quarter end, and the company expects to end the year with net debt of around $4.4 billion.
The company is focused on innovation as well. O-I Glass’ glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate its furnaces. The company’s full-scale commercial MAGMA production line is now operational. This new technology is focused on the ability of these assets to be more easily turned on and off or adjusted based on seasonality and customer demand. The early 2021 installation in Germany marks a key milestone and creates an avenue for broader deployment in 2022 and beyond. It is on track to pilot the Generation two MAGMA line in Streator, IL, this year and continues to make solid progress in developing Generation three.
It has launched O-I: Expressions, a direct-to-glass digital printing technology, which will enable brands to create highly personalized and customized glass packaging at affordable value. The company is working on a R&D lightweighting program called Ultra that aims to reduce container weight significantly to improve the convenience and sustainability profile of glass. These innovations will lead to new opportunities.
Stocks to Consider
Some better-ranked stocks in the Industrial Products sector are Encore Wire Corporation WIRE, SPX FLOW, Inc. FLOW and Casella Waste Systems, Inc. CWST. While WIRE and FLOW flaunt a Zacks Rank #1, CWST carries a Zacks Rank #2 at present.
Encore Wire has an expected earnings growth rate of around 491% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 37% in the past 60 days.
Encore Wire’s shares have soared 182% in the past year. The company has a trailing four-quarters earnings surprise of 271%, on average.
SPX FLOW has a projected earnings growth rate of around 101.3% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 5.3% in the past 60 days.
The company’s shares have appreciated 57% in a year. SPX FLOW has a trailing four-quarter earnings surprise of 40.4%, on average. FLOW has a long-term earnings growth of 35.2%.
Casella Waste has an estimated earnings growth rate of around 6% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 11.4%.
The company’s shares have increased 49% in the past year. Casella Waste has a trailing four-quarter earnings surprise of 42.1%, on average. CWST has a long-term earnings growth of 14.2%.
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OI Glass, Inc. (OI): Free Stock Analysis Report
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