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Owens-Illinois (OI) Beats on Q1 Earnings & Sales, Keeps View

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Owens-Illinois, Inc. OI reported first-quarter 2018 adjusted earnings of 59 cents per share, up 1.7% year over year. Also, the figure came close to the higher end of management’s guided range of 55-60 cents. Earnings also beat the Zacks Consensus Estimate by a penny. The year-over-year earnings improvement was led by sales growth and margin expansion in the Americas and Europe.

Including one-time items, the company had reported earnings of 30 cents per share in the prior-year quarter, while the first quarter does not include any adjustments.

Operational Update

Owens-Illinois’ net sales were up around 8% year over year to $1.74 billion. Revenues also surpassed the Zacks Consensus Estimate of $1.71 billion. The improvement in net sales was driven by a 2% increase in price on a global basis and favorable currency-translation impact. Favorable currency-translation impact benefited net sales by $99 million, primarily due to a stronger Euro.

Owens-Illinois, Inc. Price, Consensus and EPS Surprise


Owens-Illinois, Inc. Price, Consensus and EPS Surprise | Owens-Illinois, Inc. Quote


Shipments in Latin America improved 2% mainly due to higher shipments to food and alcoholic beverage customers and shipment improvements in Brazil. In the United States, solid growth in food and non-alcoholic beverages was more than offset by a decline in alcoholic beverages. The Asia-Pacific shipments declined in the reported quarter, partially driven by the timing of returnable float replenishment in Southeast Asia. In Europe, sales volumes continue to be robust.

Cost of sales flared up 9% year over year to $1.4 billion. Gross profit inched up 1.3% to $319 million from $315 million recorded in the year-earlier quarter. Selling and administrative expenses were up 5.9% to $126 million. Segment operating profit improved 3% year over year to $224 million. Segment operating profit margin contracted 50 basis points to 13% in the quarter.

Financial Update

Owens-Illinois had cash and cash equivalents of $418 million at the end of the first quarter, up from $312 million at the end of the year-ago quarter. The company used $370 million of cash in operating activities during the quarter compared with cash usage of $337 million recorded in the prior-year period. Owens-Illinois’ long-term debt increased to $5.6 billion as of Mar 31, 2018, compared to $5.4 billion as of Mar 31, 2017.

Owens-Illinois repurchased 2 million shares in the first quarter. The company remains on track to repurchase approximately $100 million shares in 2018.

2018 Guidance

The company maintained its adjusted earnings per share guidance of $2.75-$2.85 for 2018. The mid-point of the range reflects a 6% year-over-year improvement. Cash provided by continuing operating activities is expected to be approximately $800 million, whereas adjusted free cash flow will likely be around $400 million.

For second-quarter 2018, Owens-Illinois projects adjusted earnings per share to be around 75 cents. The company’s results will benefit from solid improvement in business operations. However, investments in assets and new technology developments, as well as a higher tax expense will hurt its performance.

Share Price Performance

In the past year, Owens-Illinois has outperformed its industry with respect to price performance. The stock has gained around 1.6% against the industry's decline of 5.8% during the same time frame.


Zacks Rank and Other Key Picks

Currently, Owens-Illinois carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the same space include Alarm.com Holdings, Inc. ALRM, H&E Equipment Services, Inc. HEES, and Caterpillar Inc. CAT. While Alarm.com and H&E Equipment Services sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alarm.com has a long-term earnings growth rate of 15.6%. The stock has appreciated 28% in a year’s time.

H&E Equipment Services has a long-term earnings growth rate of 14.4%. The company’s shares have been up 65% during the same time frame.

Caterpillar has a long-term earnings growth rate of 12%. Its shares have rallied 59% in the past year.

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