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O-I Glass, Inc. OI is benefiting from its investments in beverage can plant expansion moves in a bid to meet the rising preference for glass packaging. Moreover, the company’s efforts to bring down debt and cost-cutting actions will drive growth. The stock has gained 23.3% over the past three months, outperforming the industry’s growth of 7%.
Let’s delve deeper and analyze the factors driving the stock.
Given customers’ increasing preference for sustainable glass packaging solutions and improved consumption trends, O-I Glass projects adjusted earnings per share for 2021 to lie between $1.55 and $1.75. The mid-point of the guided range indicates a year-over-year improvement of 35%. Moreover, the company is gaining from the elevated off-premise sales owing to the pandemic-triggered drop in demand at bars and restaurants.
The company’s top priority remains investments in business. It intends to achieve this by investing in joint ventures (JVs) and incremental capacity, and through bolt-on acquisitions in emerging geographies, while delivering a solid return on invested capital.
Recently, management announced its plan to invest roughly $75 million in an expansion at its Zipaquirá, Colombia facility, in order to meet the heightening demand for highly sustainable glass packaging. This investment will help boost the Americas segment’s capacity by approximately 2%, while producing 500 million bottles annually. Notably, the facility will be one of O-I Glass’ largest and cost-effective plants.
O-I Glass is driving innovation in the glass segment. Its glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate the company’s furnaces. This new technology is also focused on the ability of these assets to be more easily turned on and off or adjusted based on seasonality and customer demand. The early 2021 installation in Germany marks a key milestone, and creates an avenue for broader deployment in 2022 and beyond. Additionally, it has launched O-I: Expressions, a direct-to-glass digital printing technology that will enable brands to create highly personalized and customized glass packaging at affordable value. These innovations will open up new opportunities.
O-I Glass is also taking measures to reduce costs in order to mitigate the impact of the pandemic. The company is focused on reducing debt and optimizing its portfolio with a strategic divestiture program. As of Dec 31, 2020, its total debt stands at $5.1 billion compared with the $5.6 billion as of Dec 31, 2019. Management expects to achieve its target of $400-$500 million in proceeds from the divestiture program by the end of this year. These moves will generate solid growth, higher margins, enhance business portfolio and strengthen the balance sheet.
Zacks Rank & Stocks to Consider
O-I Glass currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the Industrial Products sector are Deere & Co. DE, AGCO Corp. AGCO and Applied Industrial Technologies, Inc. AIT, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 133.2%.
AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 134.1% in the past year.
Applied Industrial has an expected earnings growth rate of 0.8% for fiscal 2021. The stock has appreciated 78.5% in a year’s time.
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