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What's In The Cards For Owens-Illinois (OI) In Q1 Earnings?

ByZacks Investment Research
Published 04/19/2018, 08:34 AM
Updated 07/09/2023, 06:31 AM
Owens-Illinois, Inc. (NYSE:OI) is scheduled to report first-quarter 2018 results on Apr 23, after the market closes.
In the last quarter, the company delivered earnings of 55 cents per share, beating the Zacks Consensus Estimate by 1.9% and also witnessed a year-over-year improvement of 10%. The uptick primarily reflected the benefits of the company’s global focus on reducing Total Systems Cost. The company continues to realize benefits from successful execution of its strategic initiatives in commercial programs and end-to-end supply chain management. Its focus on Total Systems Cost (“TSC”) contributed approximately $39 million during 2017.
The company’s earnings surpassed estimates in the trailing four quarters, recording an average positive earnings surprise of 7.18%.
Owens-Illinois, Inc. Price and EPS Surprise

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

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

Owens-Illinois expects adjusted earnings per share for first-quarter 2018 to be at 55-60 cents. The mid-point of the guidance range is in line with the prior-year quarter. Favorable currency impact, higher shipments, favorable price cost spread and impact from Total Systems Cost approach will be offset by impact of engineering activity, investments in strategic capital and capabilities as well as interest and taxes. Despite Owens-Illinois’ deleveraging and refinancing actions in the past 12 months, its debt-to-capitalization ratio remains high at 85%. This is a concerning factor. Further, the company expects no substantive impact of the tax reform currently on its adjusted earnings.

Despite favorable market trends in Asia-Pacific, sales growth has not translated to the bottom line due to ongoing downtime from repair activity, changing customer needs and increasing the supply chain complexity. To meet the customers demand, Owens-Illinois has begun shipping it from where its readily available. This has in turn increased supply chain costs which are impacting the bottom line. To fundamentally address the situation, the company began substantial asset investments in the fourth quarter of 2017 to improve the supply chain scenario. These activities will continue in the first quarter as well and is expected to affect earnings in the region.

Owen-Illinois’ acquisition of Vitro's food and beverage business has provided the company a competitive edge in the attractive and growing glass segment of the packaging market in Mexico, further solidifying its position as the world's leading glass container producer. The company anticipates realizing around $30 million in run-rate cost synergies by 2018 through both procurement savings and operating efficiencies. This will aid first-quarter results as well.
Earnings Whispers
Our proven model does not conclusively show that Owens-Illinois is likely to beat estimates this quarter. This is because a stock must have the right combination of the two main ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. But that is not the case here as you can see below.
Zacks ESP: Owens-Illinois has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 58 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: Owens-Illinois carries a Zacks Rank #3, which increases the predictive power of ESP. However, an earnings ESP of 0.00% makes surprise prediction difficult.
We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Share Price Performance
The company’s price performance has been better than the industry over the past year. Its shares have gained 5.7%, outperforming the industry’s decline of 2.1%.
Stocks Worth a Look
Here are a few industrial products stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Axon Enterprise, Inc. (NASDAQ:AAXN) has an Earnings ESP of +12.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. Axon’s shares have surged 90% in the past year.
The Earnings ESP for Deere & Company (NYSE:DE) is +2.69%. It carries a Zacks Rank #1. Shares of Deere have gone up 38% in a year’s time.
A. O. Smith Corporation (NYSE:AOS) has an Earnings ESP of +0.96% and a Zacks Rank #2. Its shares have gone up 31% in a year’s time.
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Owens-Illinois, Inc. (OI): Free Stock Analysis Report

A. O. Smith Corporation (AOS): Free Stock Analysis Report

Deere & Company (DE): Free Stock Analysis Report

Axon Enterprise, Inc (AAXN): Free Stock Analysis Report

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