Owens-Illinois, Inc. OI continues to benefit from its successful joint venture. Further, the company’s efforts to improve productivity across all businesses, functions, processes and geographies will aid in garnering higher profits.
Owens-Illinois carries a Zacks Rank #2 (Buy). It has a VGM score of B. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1, 2 or 3 make solid investment choices.
Here's why investors should add this stock to their portfolio right now.
Healthy Growth Projections
The Zacks Consensus Estimate for earnings for fiscal 2018 and fiscal 2019 reflects year-over-year growth of 3.4% and 7.7%, respectively. The company’s long-term earnings growth rate of 6.8% holds promise.
Shares of the company have gained 1% in the past year, against the industry’s decline of 7%.
Return on Equity (ROE)
Owens-Illinois’ trailing 12-month ROE supports its growth potential. The company’s ROE of 43.3% compares favorably with the industry’s average ROE of 25.0%, reflecting that the company is efficient in utilizing shareholders’ funds.
Valuation Looks Cheap
Owens-Illinois is currently trading at a trailing 12-months P/E multiple of 5.9 while the industry’s average is pegged at 9.3. Consequently, the company is undervalued in comparison with industry peers.
Positive Earnings Surprise History
The company has an impressive earnings history having outperformed the Zacks Consensus Estimate in three of the preceding four quarters, with average beat of 1.56%.
Upbeat Guidance for 2019
In 2019, the company anticipates top-line growth and margin expansion aided by its Total System Cost approach (“TSC”) and footprint optimization. The company expects earnings per share of around $3.00 in fiscal 2019. It anticipates about 1% volume growth and continued growth in the JV with Constellation Brands Inc STZ in 2019. In Europe, wine sales will be higher in 2019 due to the strong grape harvest in 2018.
Glass packaging in Western Europe has been growing for last two years — in line with total packaging. Premium products in Europe are growing significantly faster than overall market. The company has been outperforming the European beer market over the past five years, and this trend is expected to continue. The company’s efforts to add capacity in Europe, supply chain performance, and footprint optimization poises it well for growing volumes and expanding margins in the region.
In the United States, demand for glass is improving bolstered by favorable consumer trends and increased preference of customers for glass packaging. Non-beer categories in the United States continue to grow at low-single digits over time. Consequently, the company has focused on these categories, food, non-alcoholic beverages as well as wine and spirits by improving customer relationships, commercial and design capabilities, and converting almost 20% of its beer capacity into flexible capacity to meet non-beer customer demand. Overall, the Americas are expected to generate higher sales, profit and margin in the coming year. In Asia Pacific, growing demand in emerging markets will drive volumes.
Other Stocks to Consider
Some other top-ranked stocks in the same sector include Brady Corporation BRC and Lindsay Corporation LNN. Both the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Brady has a long-term earnings growth rate of 7.5%. The company’s shares have gained 11% over the past year.
Lindsay has an estimated long-term growth rate of 18%. Its shares have gained 3% in a year’s time.
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