Owens-Illinois (OI - Analyst Report) has met or beat the Zacks Consensus Estimate in each of the last seven quarters. Over that span, there were only two meets and more importantly to aggressive growth investors, the last two reports saw solid beats on the top line. The stock is a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.
OI beat the Zacks Consensus Estimate of $0.40 by $0.08 for a 20% positive earnings surprise. The topline was equally as impressive with the company reporting revenues of $1.588B and that was $60M more than expected for a 3.9% positive revenue surprise.
As a result of the great performance Wall Street sent shares of OI higher by more than 4% in the session following the release.
Owens-Illinois makes glass containers. The Company's principal product lines are glass containers for the food and beverage industries. Owens-Illinois was founded in 1903 and is headquartered in Perrysburg, Ohio.
As noted above the company has a solid recent history of beating the number. With five of the last seven reports coming in ahead of the Zacks Consensus Estimate there is a clear signal here that company executives know how to manage Wall Street.
When I expand my view back another seven quarters I see another five beats, but I add on two misses. The 14 quarter history is a solid one, with 10 beats, 2 misses and 2 meets.
Estimates have been moving higher almost all year. The 2016 Zacks Consensus Estimate was $2.15 in February, but moved higher by two and three cents in the following two months. A big move higher of a dime in May brought the number to $2.30, and it remained at that level for the month of June.
The 2017 Zacks Consensus Estimate moved from $2.41 to $2.55 over the same time period albeit with fewer actual increases.
The valuation for OI is nothing if not enticing. The forward PE of 7.5x is less than half the industry average of 16x. Just because one metric is super low, don't expect the stock to just double to catch up to the industry average. To support that argument, look at the price to book of 6.6x when the industry average is 7x. The price to sales multiple of 0.4x is only one third of the 1.2x industry average.
To me, the valuation looks very attractive to a company that is looking at double the industry average revenue growth for this year. Analysts are looking for 9.5% revenue growth for OI this year compared to 4.3% revenue growth for the broader industry.
More growth at a discount? That is what I love to see.
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.
Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.