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Libbey Inc.

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Libbey Inc. (LBY - Free Report) has been showing considerable strength following its outstanding second quarter 2012 results, which included an earnings surprise of 108.5%. Shares of this glass tableware manufacturer hit a new 52-week high on September 18, shortly after announcing some cost reduction measures. With attractive valuation metrics, including a price-to-sales (P/S) ratio as low as 0.4, this Zacks #1 Rank (Strong Buy) stock is a compelling value pick.

Solid Second Quarter

On July 26, Libbey reported adjusted earnings of 98 cents per share for the second-quarter, which crushed the Zacks Consensus Estimate of 47 cents. The company has now beaten the Zacks Consensus Estimate in three out of the last four quarters with an average surprise of nearly 70%. Earnings also jumped 96% from the prior-year quarter driven by Libbey’s productivity improvement and cost-control initiatives.

Revenues declined 2.2% year over year to $209.2 million due to foreign exchange headwinds. Excluding the currency headwinds, revenues increased 1.4% driven by a strong performance in the Glass Operations segment, which grew 2% in constant currency terms thanks to solid sales in China, the U.S. and Canada.

Adjusted operating income increased 19.4% to $29.0 million in the quarter as sluggish revenues were offset by productivity improvement and cost control. Glass Operations earnings improved 27.8% in the quarter.

Rising Earnings Estimates

The Zacks Consensus Estimate for 2012 has increased 32.5% over the last 60 days to $1.55 per share, implying year-over-year growth of 25.3%. For 2013, the Zacks Consensus Estimate rose by 5.1% over the same timeframe to $1.64 per share, reflecting year-over-year growth of 5.8%.

Plenty of Value

Libbey has performed reasonably well so far this year, generating a healthy year-to-date return of roughly 20.4%.

Libbey has enough potential to attract investors seeking value. In addition to having a low P/S, the stock has an attractive forward P/E ratio of 10.2. (A P/S ratio lower than 1.0 and a P/E below 15.0 generally indicate value.)

The company also has other solid fundamentals, such as a superb return on equity (ROE) of 100.2%. The S&P 500, in comparison, has an average ROE of 14.4%.

Based in Toledo, Ohio, Libbey is one of the largest manufacturers of glass tableware in the U.S. and Canada. It sells its products to foodservice, retail, industrial and premium customers in more than 100 countries. Libbey has a market cap of roughly $322 million.

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