3 Glass Products Stocks to Watch in a Challenging Industry
Despite increased costs and labor shortage marring the near-term outlook of the Zacks Glass Products industry, it is poised to benefit from the rising demand for glass — both as a packaging option and for use in construction. This is backed by its endless recyclability and sustainability benefits. Growing demand for energy-efficient, smart windows or smart glass panels will be another catalyst for the industry going forward.
Companies like Xinyi Glass XYIGF, Apogee Enterprises APOG and View, Inc. VIEW are posed to gain from their efforts to capitalize on this demand by boosting capacity and introducing innovative products to the market.
About the Industry
The Zacks Glass Products industry comprises companies that manufacture and sell glass products. One company produces glass containers for packaging beverages, food and pharmaceuticals. Another player in the industry offers coated and high-performance glass used in customized window and wall systems. The same company caters to the construction industry, ranging from commercial and multi-family residential to institutional buildings. It also provides coated glass for picture framing, wall décor and display applications. One company offers smart glass windows using artificial intelligence to adjust and suitably increase access to natural light while minimizing heat and glare. Another company developed an electrokinetic technology that can be retrofitted on any glass, enabling buildings to cut energy consumption and save on heating and cooling costs, the need of the hour.
Major Trends Shaping the Future of the Glass Products Industry
Inflation and labor Shortage Remain Near-Term Headwinds: The industry has been witnessing rising costs for transportation, chemical and fuel and supply-chain headwinds. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. Also, rising inflation, higher interest rates and construction costs could impact the demand for the industry’s products.
Glass Packaging Gaining Popularity: Glass is increasingly becoming the packaging choice for customers, given its endless recyclability without a loss in quality. More than 80% of recycled bottles are used in making new bottles. This also helps negate the requirement for raw materials. As consumers are becoming more aware of their environmental footprint, a sharp spike in demand is noticed for refillable bottles, which offer the most sustainable and economical rigid packaging option. Manufacturers are focused on improving their products by reducing the weight of bottles for more convenient handling. Also, premium cosmetic and beverage brands are opting for glass to differentiate their products through packaging and ensure quality maintenance. Per Statista, the global market value of glass containers and bottles is expected to surge to $96 billion in 2029 from $60.9 billion in 2022.
Demand in the Construction Sector Holds Promise: In recent years, the use of glass gained popularity in construction as a sustainable alternative to traditional building materials, including wood and bricks, owing to its cost-effectiveness, lightweight, immense strength and environmentally friendly factor. Glass increases the influx of natural light in the building, reduces energy consumption, minimizes carbon emissions and enhances the aesthetic appeal of structures. Rising construction activities across the residential, commercial and industrial sectors are likely to fuel the glass products industry’s growth. Increasing investments in the renovation or modernization of the existing infrastructure will also drive the industry’s growth. Various governments are introducing favorable policies and granting incentives to promote green construction to minimize greenhouse emissions and energy consumption, which bode well for the industry. The global construction glass market is expected to be $52.7 billion in 2023 and grow thereafter, seeing a CAGR of 7%, to reach $190.3 billion by 2027.
Technological Innovation is the Key: Some players revolutionized the industry by bringing smart glass panels or smart windows to the market. These innovative products are designed to enable people to lead healthier and more productive lives by increasing access to daylight and views while minimizing glare and heat from the sun and keeping occupants comfortable. These products also help cut down on energy consumption from lighting and HVAC, thus reducing carbon emissions. The Inflation Reduction Act of 2022, already signed into law, will be a game changer for the industry as it includes a 30-50% Investment Tax Credit for smart windows.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Glass Products industry is a four-stock group within the broader Industrial Products sector. The industry currently carries a Zacks Industry Rank #230, which places it in the bottom 7% of the 251 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates gloomy prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. In the past three months, the industry’s earnings estimates for the current year have moved down 15%.
Despite bleak near-term prospects, we will present a few Glass Products stocks that one can add to one's portfolio, given their prospects. But it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Versus S&P 500 & Sector
The Glass Products industry has underperformed the S&P 500 and the sector in the past year. The stocks in this industry have collectively declined 13.4% against the Industrial Products sector’s rise of 8.6%. The S&P 500 composite has risen 21.2% during the said time frame.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month EV/EBITDA ratio, a commonly-used multiple for valuing Glass Products companies, we see that the industry is currently trading at 4.91X compared with the S&P 500’s 11.28X and the Industrial Products sector’s 17.19X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)
Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)
Over the last five years, the industry traded as high as 7.68X and as low as 4.27X, the median being 5.82X.
3 Glass Products Stocks to Keep an Eye on
Xinyi Glass: The company’s strategic expansion plan and acquisition of production capacities across different product segments will continue to aid growth. The company continues to invest in research and to develop and launch a range of unique glass products with different colors, thicknesses, special coating materials, high value-added features and parts, accessories and specialties. Focus on cost control, improving supply chain flow and efforts to re-engineer its production process by adding automation features and a centralized control management system have enhanced its productivity and yield rate. It has also helped reduce carbon emissions, wastage and overall labor, production, and energy costs, which is commendable.
The Zacks Consensus Estimate for Kwun Tong, Hong Kong-based company’s fiscal 2024 earnings has remained stable in the past 90 days. XYIGF currently has a Zacks Rank of 3.
Price: XYIGF
Apogee: The company’s Architectural Glass segment is gaining on an improved pricing and product mix, which reflects its strategic shift toward more premium products. Efforts to improve productivity gains have also driven the segment. The segment has been winning several project awards and building a project pipeline for the coming years. The company’s solid liquidity position, coupled with a strong free cash flow, places it well to drive growth. Following a detailed review of its business, the company has embarked on a strategy to deliver profitable growth and improved returns. It has set three-year financial goals, which include a ROIC greater than 12%, an operating margin of more than 10% and revenue growth above 1.2 times growth of the non-residential construction market.
The Zacks Consensus Estimate for Apogee’s ongoing year’s earnings has moved 3% north over the past 90 days. The consensus mark indicates year-over-year growth of 16%. This Minneapolis, MN-based entity has a trailing four-quarter earnings surprise of 16%, on average. Apogee currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price: APOG
View: The company is seeing top-line improvement, aided by growth across all product lines, including Smart Glass, Smart Building Platform and Smart Building Technologies. The company has completed the pivot to multi-family residential. The multi-family vertical now represents the majority of the company’s project pipeline. View has been significantly expanding its product portfolio, bringing several smart building products to the market. With a solid customer base and investment to boost its manufacturing capacity, VIEW is poised for growth. Increasing customer interest in smart windows, following the passage of the Inflation Reduction Act of 2022, which includes a 30-50% ITC, bodes well. VIEW is also working on forging business relationships with real estate brokers to spread awareness of its products and their benefits. The company has been focusing on lowering its structural costs and improving efficiency, which have been aiding margin expansion.
The Zacks Consensus Estimate for this Milpitas, CA-based player’s current-year bottom line is pegged at a loss of $16.20. The loss has narrowed from the previous consensus estimate of a loss of $18.70 per share expected 90 days ago. The company currently has a Zacks Rank of 3.
Price: VIEW
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Xinyi Glass (XYIGF) : Free Stock Analysis Report
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