On Nov 25, we issued an updated research report on O-I Glass (NYSE:OI), Inc. OI. The company continues to benefit from the growing preference for glass packaging, focus on innovation, capacity expansions, joint-venture deals and acquisitions. Further, the company’s turnaround initiatives and cost-control measures will aid the company.
Upbeat Guidance
O-I Glass expects sales and production volume for the current quarter to be flat to slightly up compared with the prior-year quarter on customers’ increasing preference for sustainable glass packaging solutions. Consequently, management expects adjusted earnings per share for the ongoing quarter between 30 cents and 35 cents. The guidance factors in higher selling prices which will likely offset cost inflation. Moreover, the bottom line is anticipated to benefit from the company’s continued favorable operating performance and cost-reduction efforts.
Improved Glass Demand to Aid Growth
O-I Glass projects 2020 sales volumes to be down 3-5%, year on year. This reflects a more favorable outlook compared with the previous guidance of a 4-7% decline. Further, the company is gaining from the elevated off-premise sales owing to a sharp drop in demand at bars and restaurants. It expects to benefit from glass demand and improved consumption trends as well. O-I Glass’ focus on improving its operating performance through several turnaround initiatives and enhanced factory performance will boost the company’s current-year performance.
Investments & Acquisitions to Drive Company
O-I Glass is driving innovation in the glass segment, evident from the development of MAGMA, a revolutionary breakthrough initiative to reimagine glassmaking with transformational technology and new processes. Additionally, it launched O-I: Expressions, a direct-to-glass digital printing technology that will enable brands to create highly-personalized and customized glass packaging at an affordable value. These innovations will open up opportunities in the near term.
The company’s top priority remains investments in the 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. In sync with its continued divestiture program, the company sold its interest in a soda ash joint venture. The company recently entered into an agreement with Krones AG, the global leader in food and beverage processing and filling technologies. Together, the companies will improve Glass in line with speed and efficiency, enhance the ability to respond to market trends, and develop innovative and sustainable glass systems.
Focus on Debt Reduction
O-I Glass is taking measures to reduce costs in order to mitigate the impact of the pandemic. The company’s several diversification program resulted in generating favorable cash flow and helped reduce net debt over the past year. This will aid growth in the near term. O-I Glass’ total debt was $5.4 billion at Sep 30, 2020 compared with $5.9 billion as of Sep 31, 2019. As of Sep 30, 2020, the company had more than $2 billion of total committed liquidity, including nearly $606 million cash on hand as well as undrawn availability on committed lines of credit at the end of third-quarter 2020. The company has no debt maturities until March 2021.
Few Headwinds to Counter
The resurgence of coronavirus cases might impact the economic recovery unfavorably. Hence, uncertainty related to the severity of the pandemic and governmental authorities’ actions to contain the virus might affect O-I Glass’ current-year performance.
Price Performance
Shares of the company have appreciated 54.1% over the past six months, outperforming the industry’s growth of 50.1%.
Zacks Rank & Stocks to Consider
O-I Glass currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Crown Holdings (NYSE:CCK), Inc. CCK, iRobot (NASDAQ:IRBT) Corporation IRBT and SiteOne Landscape Supply (NYSE:SITE), Inc. SITE. While Crown Holdings and iRobot flaunt a Zacks Rank #1 (Strong Buy), SiteOne Landscape carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Over the past six months, the company’s shares have appreciated 56.2%.
iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 19.2% in the past six months.
SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 51.7% in six months’ time.
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