The Zacks Glass Products industry is poised to benefit from 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 smart windows or smart glass panels will be a catalyst for the industry, going forward.
OI Glass OI, Apogee Enterprises APOG, View VIEW and Crown Electrokinetics CRKN are likely to gain from solid demand in their end markets, focus on bringing innovative products and their 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. It caters to the construction industry, ranging from commercial, 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 and views, while minimizing heat and glare. Another company developed an electrokinetic technology, which 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 the recycled bottles are used in making new bottles. This also helps negate the need for raw materials. Every ton of glass recycled 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 opted for glass to differentiate their products through packaging and also ensuring quality maintenance. Per Statista, the global production volume of glass bottles and containers amounted to nearly 690 billion units in 2020 and by 2026, this figure will reach 922 billion units.
Growth in Construction Demand an Upside: 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, light weight, immense strength and the 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 also bodes well for the industry. The global construction glass market reached a value of $96.87 billion in 2021 and is expected to touch $142.15 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 (ITC) for smart windows.
Pricing Actions, Improving Efficiency to Offset Cost Inflation: The industry is witnessing rising costs for transportation, chemical and fuel, and supply-chain headwinds. Therefore, the 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 6-stock group within the broader Industrial Products sector. The industry currently carries a Zacks Industry Rank #34, which places it in the top 14% 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 outperformed the S&P 500 and the sector over the past year. The stocks in this industry have gained 5% against the Industrial Products sector’s loss of 7.7% and the S&P 500 composite’s decline of 13.7% 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 8.24X compared with the S&P 500’s 10.89X and the Industrial Products sector’s 15.84X. 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 11.08X and as low as 3.09X, with the median being 6.27X.
4 Glass Products Stocks to Keep an Eye on
O I Glass: OI has been benefiting from strong demand for glass packaging, higher selling prices and efforts to improve productivity and efficiency. OI’s cost-control measures helped it negate the impact of higher costs and supply-chain issues on its margins. Its margin-expansion initiative is expected to reap annual benefits of $50 million in the 2022-2024 forecast period. Benefits from its portfolio optimization program and a focus on acquisitions and innovations are 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. O I Glass remains on track with its first MAGMA greenfield plant in Kentucky starting 2024. OI’s consistent investments in boosting production capacity to meet strong demand trends for glass containers bode well. Backed by these tailwinds, shares of the company have gained 25.3% over the past three months.
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 2022 have moved 4.2% north over the past 90 days. The consensus estimate indicates 23% growth from the earlier fiscal year’s tally. OI has a trailing four-quarter earnings surprise of 14.9%, on average, a long-term estimated earnings growth rate of 3% and a Zacks Rank #2 (Buy), currently.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: OI
Crown Electrokinetics: CRKN is focusing on commercializing electrokinetic technology for use in the smart glass market. It recently raised $4 million of equity to help deliver its first-generation product. CRKN is advancing toward closing a $30-million debt facility, which is expected by this year-end. Once completed, CRKN can build new roll-to-roll lines and produce film at widths ranging between 12 inches and 72 inches. Once the new lines operate at full capacity, management’s estimate for the Smart Window Insert annualized revenues will exceed $200 million. The Generation 1.0 smart window inserts are expected to be delivered in the first quarter of 2023. CRKN also continues to review and restructure its organization, and as of September, these efforts had reduced costs by $3.1 million or 24%. CRKN is also expected to benefit from the recently announced Inflation Reduction Act.
Crown Electrokinetics, a smart glass technology company, offers electrokinetic film technology for smart or dynamic glass. The Zacks Consensus Estimate for this Corvallis, OR-based entity’s 2022 bottom line is pegged at a loss of 91 cents, having narrowed from the loss per share of $1.12, expected 90 days ago. CRKN has a trailing four-quarter earnings surprise of 13.5%, on average. The stock currently has a Zacks Rank #2. The company’s shares have declined 53.3% over the past three months.
Price & Consensus: CRKN
Apogee Enterprise: APOG’s margins and adjusted earnings per share improved sequentially in the last five quarters, led by a continued strong performance in Architectural Services and Framing Systems. Apogee is witnessing strong demand from new construction activities. Various government stimulus measures provide support to APOG’s construction end markets. The Architectural Services segment steadily wins several new project awards and has a solid project pipeline. APOG expects to improve margins in the Architectural Glass and Framing segments in the long term, driven by its restructuring actions, pricing and cost-reduction actions, and productivity improvements through lean efforts. The company’s shares have gained 17% over the past three months.
The Zacks Consensus Estimate for the ongoing-year earnings has moved 2.6% north and indicates a 58.1% surge from the year-ago reported number. This Minneapolis, MN-based entity has a trailing four-quarter earnings surprise of 48.4%, on average. Apogee currently carries a Zacks Rank #3 (Hold).
Price & Consensus: APOG
View: VIEW is seeing improvement in its top line, aided by growth across all product lines, including Smart Glass, Smart Building Platform and Smart Building Technologies. Recently-implemented cost-saving initiatives aided margins. View significantly expanded 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 well for growth. Increasing customer interest in smart windows following the passage of the Inflation Reduction Act of 2022, which includes a 30-50% Investment Tax Credit (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 Zacks Consensus Estimate for this Milpitas, CA-based player’s current-year earnings indicates 26.4% growth from the year-earlier reading. The stock currently has a Zacks Rank of 3. The company’s shares have declined 24.8% over the past three months.
Price & Consensus: VIEW
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