Shares of Owens-Illinois, Inc. OI, manufacturer and seller of glass container products to food and beverage manufacturers, have been performing well of late. The stock has yielded a one-year return of around 27.7%. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead. The Zacks Rank #2 (Buy) stock has an estimated long-term earnings growth rate of 9.03%.
Estimates Moving Up
All the seven available estimates for fiscal 2017 and 2018 for Owens-Illinois have moved up in the past 30 days, reflecting the optimistic outlook of analysts.
The estimate for fiscal 2017 has gone up 3% to $2.50, reflecting a year-over-year growth of 8.04%. The Zacks Consensus Estimate for earnings for fiscal 2018 has also moved north 3% to $2.67, a year-over-year growth of 6.81%.
Positive Earnings Surprise History
Owens-Illinois has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 5.92%.
Ahead of the Industry
In the last one year, Owens-Illinois outperformed the Zacks classified Glass Products sub-industry with respect to price performance. The stock gained around 17.8%, while the industry recorded growth of 16.9%.
Stock Seems Undervalued
Owens-Illinois has a trailing 12-month price earnings (P/E) ratio of 9.22 while the Zacks categorized sub industry’s average trailing 12-month P/E ratio is 10.63. Based on this ratio, the stock seems undervalued.
Upbeat Q1 & Guidance
Owens-Illinois reported first-quarter 2017 adjusted earnings per share of 58 cents, surpassing the Zacks Consensus Estimate of 53 cents. Additionally, earnings jumped 21% year over year and exceeded management guidance range of 50–55 cents per share.
Further, the company reaffirmed adjusted earnings per share outlook for 2017 in the band of $2.40–$2.50 per share. Compared with adjusted earnings per share of $2.31 in fiscal 2016, the mid-point of the guidance range reflects a year-over-year growth of 6%.
Growth Drivers in Place
For 2017, Owens-Illinois remains on track to achieve all of its financial targets, including volume growth, margin, adjusted earnings, cash flow and deleveraging. The company’s focus on simplifying the organization and elevating productivity will drive long-term growth.
Owen-Illinois’ acquisition of Vitro's food and beverage business is delivering strong results. This transaction will provide it a competitive edge in the attractive and growing glass segment of the packaging market in Mexico, further solidifying its position as the world's leading glass container producer. The company anticipates realizing around $30 million in run-rate cost synergies by 2018 through both procurement savings and operating efficiencies. It should contribute about 50 cents per share in 2018, while generating at least $100 million in free cash flow by 2018.
Other Stocks to Consider
Other top ranked stocks worth considering in the same sector are AGCO Corporation AGCO, Caterpillar, Inc. CAT and Deere & Company DE All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters. Caterpillar generated an average positive earnings surprise of 40.25% in the past four quarters. Deere has an average positive earnings surprise of 9.89%.
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