Owens-Illinois Beats Bottom Line

Owens-Illinois, Inc. (OI - Analyst Report) reported adjusted earnings of 84 cents per share, surpassing the Zacks Consensus estimate by 12 cents. Earnings were a penny above 83 cents earned in the year ago quarter.

Including charges for restructuring and asset impairment of $20 million or 12 cents a share and loss from discontinued operations of $3 million or 2 cents a share, the company reported a net income of $116 million or 71 cents per share compared with $139 million or 85 cents per share in the third quarter of 2010.

Operational Update

Revenues increased 10.2% year over year to $1.86 billion, driven by improved shipments. Volumes also improved across all regions. Sales also benefited from favorable foreign currency translations and favorable pricing. Top line however lagged the Zack Consensus estimate of $1.93 billion.

Manufacturing and delivery costs were $1.47 billion, up 11% year over year.

Selling and administrative expenses increased 11.3% year over year to $138 million while research, development and engineering expenses surged 28% year over year to $18 million.

Segment operating profit in the reported quarter declined 3.6% year over year to $269 million as higher sales prices, stronger shipments and favorable foreign currency translation were offset by increased manufacturing costs owing to high cost inflation.

Financial Update

Owens-Illinois exited the third quarter with cash and cash equivalents of $256 million as compared with $657 million as of September 30, 2010.

Long-term debt decreased to $3.74 billion at the end of the third quarter of 2011 from $4.00 billion at the end of the third quarter of 2010.

Cash flow from operating activities was $189 million in the third quarter of 2011 compared with $221 million in the year-ago period.

Capital expenditure totaled $51 million in the quarter compared with $154 million in the year ago quarter.

Free cash flow generated in the quarter was $138 million, primarily deployed to reduce debt.

Guidance

Management expects fourth quarter adjusted earnings of 45 cents.

The company expects free cash flow in the range of $200 to $250 million for fiscal 2011.

The quantitative Zacks #5 Rank (short-term Strong Sell rating) for Owens-Illinois indicates no clear directional pressure on the stock over the near term.

Headquartered in Perrysburg, Ohio, Owens-Illinois through its subsidiaries manufacture and sell glass containers primarily in Europe, North America, South America, and the Asia Pacific. The company competes with Silgan Holdings Inc. (SLGN - Analyst Report).

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