Here's Why You Should Invest in O-I Glass (OI) Stock Now
Solid demand for glass packaging, its margin expansion efforts and upbeat growth projections, and share performance ahead of the industry are some of...
Growing global preference for glass as the healthy, premium and sustainable packaging option for food and beverage bodes well for O-I Glass, Inc. OI. The company’s ongoing divestiture program, investment in incremental capacity and acquisitions, and product innovation are key catalysts. Its cost-control measures, and ongoing efforts to improve productivity and efficiency will boost margins.
The company currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let's delve deeper into the factors that make the O-I Glass stock a compelling investment option at the moment.
Solid Q2 Performance
O-I Glass reported second-quarter 2021 adjusted earnings of 54 cents per share, which marked a substantial improvement from the prior-year quarter’s figure of 1 cent per share. This improvement was attributed to higher sales and production volumes, and solid operating and cost performance. The bottom line surpassed the Zacks Consensus Estimate of 47 cents and management’s guidance of earnings per share between 45 cents and 50 cents.
The company has beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 26%.
Upbeat Outlook for 2021
O-I Glass projects adjusted earnings per share for the ongoing year between $1.65 and $1.75. The mid-point of the range indicates year-over-year growth of 39%. Sales volume in tons will be up 4-5% from 2020. Higher selling prices, benefits from its margin expansion initiatives, improving productivity, operating performance and cost management will drive earnings in the days ahead.
Impressive Price Performance
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Shares of the company have appreciated 41.2% over the past year, against the industry’s decline of 10.2%.
Superior Return on Equity (ROE)
O-I Glass’ trailing 12-month ROE supports its growth potential. The company’s ROE of 76.1% is much higher than the industry’s average ROE of 44.1%, reflecting that it is more efficient in utilizing shareholders’ funds.
Upbeat Growth Projections
The Zacks Consensus Estimate for fiscal 2021 earnings per share is currently pegged at $1.72, indicating growth of 41% from the prior year. The same for fiscal 2022 stands at $1.91, suggesting year-over-year improvement of 11.5%. The stock has an estimated long-term earnings growth rate of 19.8%.
Growth Drivers in Place
O-I Glass is poised to gain from increased preference of customers for glass packaging given its recyclability, and being a healthier and safer alternative to plastic packaging. The company has been investing in incremental capacity, joint ventures and acquisitions in emerging geographies to capitalize on this trend. For instance, recently O-I Glass announced investments of $75 million in a bid to expand a facility in the Andean market where demand for glass containers exceeds current capacity.
Per its $1.15 billion divestiture program, which is an effort to optimize structure, O-I Glass has completed or entered into agreements for assets sales worth $930 million to date. The company has completed more than 80% of the program with proceeds used to reduce debt and improve financial flexibility. Net debt was $4.5 billion as of second-quarter end and it expects to end the year with net debt below $4.4 billion. The company had around $2.2 billion of total committed liquidity at the end of the second quarter.
The company is focused on innovation as well. O-I Glass’ glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate its furnaces. The company’s full-scale commercial MAGMA production line is now operational. This new technology is focused on the ability of these assets to be more easily turned on and off or adjusted based on seasonality and customer demand. The early 2021 installation in Germany marks a key milestone and creates an avenue for broader deployment in 2022 and beyond. It is on track to pilot the Generation two MAGMA line in Streator, IL, in the second half of the year and continues to make solid progress in developing Generation three.
It has launched O-I: Expressions, a direct-to-glass digital printing technology, that will enable brands to create highly personalized and customized glass packaging at affordable value. The company is working on a R&D lightweighting program called Ultra, which aims to reduce container weight significantly to improve the convenience and sustainability profile of glass. These innovations will lead to new opportunities.
Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include Encore Wire Corporation WIRE, Lincoln Electric Holdings, Inc. LECO and Lindsay Corporation LNN. While Encore Wire and Lincoln Electric sport a Zacks Rank #1, Lindsay carries a Zacks Rank #2, at present.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. In a year’s time, the company’s shares have gained 68%.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 45% over the past year.
Lindsay has an estimated earnings growth rate of 17.4% for fiscal 2021. The company’s shares have gained 67.5% in a year.
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OI Glass, Inc. (OI): Free Stock Analysis Report
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