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Analyst Blog

Shares of Owens-Illinois, Inc. (OI - Analyst Report) reached a new 52-week high of $29.16 on Tuesday, May 21, 2013. The new high was primarily driven by expected benefits from higher pricing, modest improvement in volumes, restructuring actions, cost savings as well as its growth strategy in South America.

This manufacturer of glass containers has delivered a robust one-year return of about 48.69% and year-to-date return of about 35.83%. Average volume of shares traded over the last three months was approximately 1.3 million shares.

Owens-Illinois has been delivering positive earnings surprises over the past four quarters with an average surprise of 6.60%. This Zacks Rank #3 (Hold) stock has a market cap of $4.75 billion and a long-term expected earnings growth rate of 9.05%.

Owens-Illinois’ Strengths

Owens-Illinois will benefit from the restructuring actions undertaken in North American and Asia-Pacific regions in 2012, global structural cost reductions as well as its growth strategy in South America. Furthermore, a new furnace in Brazil in late 2012 will lead to volume growth and logistics savings in the region.

Owens-Illinois has embarked on a multi-year asset optimization program in Europe, which includes elimination of underperforming assets, and reduction of idle capacity. The company outlines investment in low cost additional capacity and enhancement in quality, speed and flexibility. This is expected to lead to improvements in profits in Europe in the second half of 2013.

Weak 1Q13 Earnings, But Improved Outlook

Owens-Illinois’ first-quarter 2012 earnings per share of 60 cents were down 18% from the year-ago earnings of 73 cents per share, but up 7% from the Zacks Consensus Estimate of 56 cents. Improved operating profits in South America and Asia-Pacific were offset by weak economic conditions in Europe.

Despite a weak first quarter dragged down by Europe, the company expects strong contribution from the emerging regions and stable market conditions in North America to continue to support growth while macroeconomic uncertainty in Europe will remain a deterring factor. The company expects overall modest volume growth in 2013, and higher prices to counter higher material costs. Adjusted earnings are expected in the range of $2.60 to $3.00 per share.

The Zacks Consensus Estimate for 2013 is currently at $2.78 per share, reflecting a 5.23% year over year growth and within the company’s guidance.

Other Stocks to Consider

Other stocks in the containers industry that are currently performing well and have a good visibility include Berry Plastics Group, Inc. (BERY - Snapshot Report), Graphic Packaging Holding Company (GPK - Snapshot Report) and UFP Technologies, Inc. (UFPT - Snapshot Report) with a Zacks Rank #2 (Buy).