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Owens-Illinois EPS Tops, Revs Miss

Zacks Equity Research

Owens-Illinois’s(OI) first-quarter 2012 adjusted earnings were 73 cents per share, which exceeded the Zacks Consensus Estimate of 66 cents as well as the year-ago adjusted earnings of 53 cents per share.

On a reported basis, the company posted earnings of 73 cents per share compared with the year-ago earnings of 50 cents.

Net sales increased 1.2% to $1.739 billion in the quarter, missing the Zacks Consensus Estimate of $1.751 billion. The year-over-year growth was attributable to an increase in pricing, offsetting the negative impact of currency translation.

Operational Update

Manufacturing, shipping and delivery expense declined 1.1% year over year to $1.361 billion in the quarter. Selling and administrative expenses also fell 1.4% to $140 million. Consequently, operating profit improved 25% year over year to $260 million.

Financial Update

Cash and cash equivalents were $299 million as of March 31, 2012, versus $430 million as of March 31, 2011. Long-term debt amounted to $3.724 billion as of March 31, 2012, compared with $3.991 billion as of March 31, 2011. Cash used in operating activities was $95 million during the quarter compared with $85 million in the year ago quarter.


The company is hopeful that the pricing strategy and operational efficiencies will benefit the second-quarter 2012 results year over year. These strategies would also benefit the results of North American operation.

However, the company is cautious about the demand trends, particularly in Europe. So, it thinks results in the second quarter will be at par with the second-quarter 2011 results.

Owens-Illinois competes with companies like Silgan Holdings Inc. (SLGN). Silgan is scheduled to report its first quarter earnings on April 26. The company expects adjusted earnings in the band of 42 cents to 47 cents per share, while the Zacks Consensus Estimate is pegged at 46 cents.

Currently, we maintain a long-term Neutral recommendation on Owens-Illinois. The stock retains a short-term Zacks #2 Rank (“Buy”).

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