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Owens-Illinois (OI) Earnings Beat, Sales Miss Estimates in Q3

Zacks Equity Research

Owens-Illinois, Inc. OI reported third-quarter 2019 adjusted earnings of 54 cents per share, which surpassed the Zacks Consensus Estimate of 53 cents. The bottom line declined 28% from the prior-year quarter figure of 75 cents.

Including one-time items, the company reported loss per share of $3.69 in the reported quarter against profit per share of 75 cents in the third quarter of 2018.

Operational Update

Net sales declined 3.8% year over year to $1,670 million, as favorable pricing and contribution from the Nueva Fanal acquisition were offset by unfavorable currency translation and lower sales volume. Global shipments were down 1% year over year in the reported quarter, reflecting slower market growth, particularly in Mexico and China as well as continued weak demand for beer and non-alcoholic beverages in the United States. The top line lagged the Zacks Consensus Estimate of $1,734 million.

Cost of sales declined 2.8% year over year to $1,371 million. Gross profit declined 7.7% year over year to $299 million. Selling and administrative expenses contracted 6% year over year to $108 million.

Total operating profit was $205 million in the reported quarter, down from $255 million in the prior-year quarter primarily due to foreign currency translation and discrete items. Benefits of higher selling price and contribution from the Nueva Fanal acquisition were offset by cost inflation and lower volumes.

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

 

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

Owens-Illinois, Inc. price-consensus-eps-surprise-chart | Owens-Illinois, Inc. Quote

Segmental Performance

Net sales at the Americas segment declined 2.2% year over year to $918 million in the third quarter of 2019. Operating profit declined 22.1% year over year to $123 million.

Net sales in the Europe segment were $588 million in the reported quarter, down 4% year over year. The segment’s operating profit declined 9.2% year over year to $79 million.

Net sales in the Asia Pacific region dipped 7.9% year over year to $152 million in the reported quarter. Operating profit declined 70% year over year to $3 million.

Financial Update

Owens-Illinois had cash and cash equivalents of $273 million at the end of the third quarter of 2019, down from $512 million at the end of 2018. The company utilized $246 million of cash in operating activities in the first nine months of 2019 against an inflow of $99 million in the comparable period last year. Its long-term debt rose to $5.5 billion as of Sep 30, 2019, from $5.2 billion as of Dec 31, 2018.

Other Updates

Owens-Illinois continues to advance the tactical and strategic portfolio review drive, which now comprises the assessment of its Australia and New Zealand (“ANZ”) operation. The first commercial-quality ware was delivered, using new MAGMA technology. Further, the company announced the expansion of MAGMA at Holzminden, Germany, which should start production in the second half of 2020.

Outlook

For fourth-quarter 2019, Owens-Illinois expects adjusted earnings per share of 45-50 cents. The company lowered adjusted earnings per guidance for 2019 to $2.20-$2.25 from $2.40-$2.55 mentioned earlier. Owens-Illinois had reported earnings per share of $2.72 in 2018. Cash provided by continuing operating activities for 2019 is expected to be $390-$415 million and adjusted free cash flow to be approximately $100 million.

Zacks Rank & Stocks to Consider

Owens-Illinois currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Industrial Products sector are Plug Power Inc PLUG, Cintas Corporation CTAS and Sharps Compliance Corp SMED. While Sharps Compliance sports a Zacks Rank #1 (Strong Buy), Cintas and Plug Power carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sharps Compliance has an expected earnings growth rate of a whopping 600% for the current year. The company has gained 48.4% so far this year.

Cintas has an estimated earnings growth rate of 12.7% for 2019. Shares of the company have rallied 63.4% year to date.

Plug Power has a projected earnings growth rate of 2.8% for the current year. The stock has gained 121.8% so far this year.

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