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Value

Owens-Illinois, Inc. (OI - Analyst Report) recently provided a better-than-expected first quarter update with earnings expected to surge 35% over the first quarter of 2010. Shares jumped on the news but this Zacks #2 Rank (Buy) still has plenty of value. OI trades with a forward P/E of just 8.4.

Owens-Illinois is the largest glass manufacturer in the world. The company produces glass containers for a variety of products including food, tea, juice, beer, wine and pharmaceuticals. It was the first to use an automatic bottle making machine in production.

Founded in 1903 and headquartered in Perrysburg, Ohio, it has a large international presence with international headquarters in Switzerland, Australia and Brazil. It has 81 plants in 21 countries.

"Encouraging Early Performance"

On Apr 10, Owens-Illinois announced that first quarter earnings results would exceed the results of Q1 in 2011 by "more than 35%". The company made 47 cents in the year ago quarter.

The results were driven by good manufacturing performance as facilities had higher productivity rates.

The quarter was also boosted by 2012 price increases designed to offset unrecovered prior year inflation and anticipated 2012 inflation.

What About Europe?

While Owens-Illinois was encouraged by the first quarter, "conflicting customer demand patterns", especially in Europe, continue to impact 2012 visibility.

In other words, the company isn't sure what's going to happen with European demand for the rest of 2012.

The Zacks Consensus Estimate for 2012 Jumps

Given the magnitude of the upside expected in the first quarter, it's not surprising that the analysts have been scrambling to raise full year estimates.

In just the last 7 days, 3 analysts have raised full year estimates.

This has boosted the Zacks Consensus Estimate to $2.88 from $2.83 in that time. The consensus called for $2.75 just 90 days ago.

That is earnings growth of 21.5% as Owens-Illinois made $2.37 per share in 2011.

Still a Value Stock

Even though shares got a boost from the update on the first quarter, they are still well below 52-week highs.

But there's plenty of value.

In addition to a P/E that is under 10, it also has a stellar price-to-sales ratio of just 0.5. A P/S under 1.0 usually indicates a company is undervalued.

It's price-to-book ratio, at 4.0, is a little hotter than I normally look for. The cut-off I use for P/B is under 3.0. However, the strong P/S ratio still indicates to me that there's a lot of value in the shares.

The company also has other solid fundamentals including a 1-year return on equity (ROE) of 21%. That is well above the average for the S&P 500 of 13.4%.

Owens-Illinois is expected to report first quarter results on Apr 26. We'll hear more from the company then about what's really going on in Europe and its other international markets.

Until then, Owens-Illinois is a value stock with double digit growth and an "encouraging" first quarter performance.

This Week's Value Zacks Rank Buy Stocks

Looking for a way to play the shale boom? GeoResources, Inc. (GEOI) is a small explorer that is expected to grow earnings by the double digits in 2012. This Zacks #1 Rank (Strong Buy) also is a value stock with a P/B of 2.2. Read the full article.

The agriculture equipment makers were on a roll in 2011 as farming income hit a record high. AGCO (AGCO) posted both record sales and earnings in 2011. This Zacks #1 Rank (Strong Buy) is still expected to see double digit earnings growth again in 2012. Yet it's also a value stock with a forward P/E of just 8.8. Read the full article.

The fertilizer stocks have attractive valuations. Intrepid Potash, Inc. (IPI) is expected to see double digit earnings growth in 2012. Yet this Zacks #1 Rank (Strong Buy) has a price-to-book ratio of just 2.0. Read the full article.

2011 was a year of records for Rush Enterprises, Inc. (RUSHA). It saw record revenue and triple digit earnings growth in 2011. Yet this Zacks #1 Rank (Strong Buy) is also a value, as it trades with a forward P/E of just 10.8. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

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