3 Stocks to Watch in the Thriving Glass Products Industry
The Zacks Glass Products industry 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 a catalyst for the industry, going forward.
O-I Glass OI, Apogee Enterprises APOG and Crown Electrokinetics CRKN are likely to gain from solid end-market demand, focus on bringing innovative products and cost-control efforts.
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
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 need for raw materials. Every ton of recycled glass saves 1,400 pounds of sand, 430 pounds of soda ash and 400 pounds of limestone/dolomite. 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 focusing on improving their products by reducing the weight of the 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.
Pricing, Improving Efficiency to Offset Cost Inflation: The industry is witnessing rising costs for transportation, chemical and fuel, and supply-chain headwinds. Therefore, industry players are increasingly focusing on pricing actions and cost reduction, and resorting to automation in manufacturing to boost productivity and efficiency.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Glass Products industry is a 5-stock group within the broader Industrial Products sector. The industry currently carries a Zacks Industry Rank #26, which places it in the top 10% of the 251 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bullish 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a solid earnings outlook for the constituent companies in aggregate.
Before we present a few Glass Products stocks for investors’ consideration, it is worth looking at the industry’s stock-market performance and its valuation picture.
Industry Versus S&P 500 & Sector
The Glass Products industry has underperformed the S&P 500 and the sector over the past year. The stocks in this industry have collectively declined 2% against the Industrial Products sector’s growth of 12.2%. Further, the S&P 500 composite has risen 8.4% 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 3.67X compared with the S&P 500’s 11.64X and the Industrial Products sector’s 14.58X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)
Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)
Over the last five years, the industry has traded as high as 7.53X and as low as 3.66X, the median being 5.88X.
3 Glass Products Stocks to Keep an Eye on
Apogee: The company’s Architectural Glass segment is gaining on improved pricing and product mix, which reflect its strategic shift toward more premium products. Efforts to improve productivity gains have also benefitted the segment. The segment has been winning several project awards and building a project pipeline for the coming years. The Architectural Framing Systems segment will benefit from the restructuring and cost-saving actions that have been completed. The segment has been winning several project awards and building a project pipeline for the coming years, which places it well for growth. Following a detailed strategic 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 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. APOG shares have gained 17% in a year.
The Zacks Consensus Estimate for Apogee’s ongoing year’s earnings has moved 7% north over the past 60 days. The consensus mark indicates year-over-year growth of 6.3%. This Minneapolis, MN-based entity has a trailing four-quarter earnings surprise of 10%, on average. Apogee currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: APOG
O-I Glass: The company has been delivering strong results, aided by strong net price realization, a solid operating performance and benefits from its ongoing margin expansion initiatives. Its consistent investments in boosting production capacity to meet the growing demand for glass packaging bode well. OI’s cost-control measures have helped it negate the impacts of higher costs and supply-chain issues on its margins. Its margin expansion initiative is expected to reap more than $100 million in benefits in 2023. Focus on acquisitions and innovations is also likely to fuel growth. Its glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate its furnaces. The MAGMA program is being implemented using a multi-generation development roadmap. Generation 1 solution has achieved its expectations. Generation 2, which is expected to add production capabilities, is expected to be ready for deployment in mid-2024. Backed by these tailwinds, shares of the company have gained 43% over the past year.
Perrysburg, OH-based O-I Glass manufactures and sells glass containers to food and beverage manufacturers, primarily in the Americas, Europe and the Asia Pacific. OI’s earnings estimates for fiscal 2023 have moved up 1% over the past 60 days. The consensus estimate indicates 39% year-over-year growth. OI has a trailing four-quarter earnings surprise of 20.5%, on average, and a long-term estimated earnings growth rate of 15%. The company currently has a Zacks Rank #2 (Buy).
Price & Consensus: OI
Crown Electrokinetics: The company acquired Amerigen 7, an emerging leader in the fields of distributed antenna systems and the construction of fiber optic infrastructure, in January 2023. Amerigen 7 has been renamed Crown Fiber Optics Corporation and operates as a wholly-owned subsidiary of CRKN. The division has garnered interest, and is winning meaningful and revenue-producing projects from leading infrastructure solution providers, consistently building a customer base. The company recently announced that it was awarded a project for $85 million with a leading infrastructure solutions provider. This marks the sixth win this year. CRKN has also been deleveraging and strengthening its balance sheet to capitalize on the growth opportunities in the fiber optics division.
Crown Electrokinetics, a smart glass technology company, is an expert in designing and installing distributed antenna systems, and constructing fiber optic networks. The Zacks Consensus Estimate for this Corvallis, OR-based entity’s 2023 bottom line is pegged at a loss of 30 cents. The estimate has been unchanged over the past 60 days and suggests an improvement from the loss of 82 cents reported by the company for fiscal 2022. CRKN has a trailing four-quarter earnings surprise of 21.9%, on average. The company currently has a Zacks Rank #3 (Hold).
Price & Consensus: CRKN
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