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O-I Glass (OI) Up 1.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for O-I Glass (OI - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is O-I Glass due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

O-I Glass' Q2 Earnings & Revenues Dip Y/Y on Low Demand

O-I Glass reported second-quarter 2020 adjusted earnings of 1 cent per share, marking a 98.6% plunge from the prior-year quarter. The Zacks Consensus Estimate for the quarter was break-even earnings per share.

Including one-time items, the company reported loss per share of 64 cents in the quarter, as against the earnings per share of 42 cents recorded in the prior-year quarter.

Operational Update

Revenues declined 19.2% year over year to $1,418 million in the June-end quarter and also missed the Zacks Consensus Estimate of $1,438 million. Lower shipments due to the pandemic hurt sales by $255 million, while foreign-currency translation reduced net sales by $88 million.

Cost of sales was down 11.6% year over year to $1,255 million. Gross profit plummeted 51.5% year over year to $163 million. Selling and administrative expenses was down 16.4% year over year to $97 million. Segment operating profit was $95 million in the reported quarter, down from the prior-year quarter’s $236 million.

Segmental Performance

Net sales in the Americas segment declined 22.5% year over year to $724 million in second-quarter 2020. Operating profit slumped 63.8% year over year to $52 million.

Net sales in the Europe segment were $555 million in the quarter, down 14.6% year over year. The segment’s operating profit plummeted 53.3% year over year to $42 million.

Net sales in the Asia Pacific region dipped 13.2% year over year to $132 million during the June-end quarter. Operating profit plunged 50% year over year to $1 million.

Financial Update

O-I Glass had cash and cash equivalents of $1,067 million at the end of the second quarter, up from $371 million at the end of the prior-year quarter. The company generated $181 million of cash from operating activities in the reported quarter compared with cash utilization of $67 million in the prior-year quarter. Its long-term debt rose to $6.5 billion as of Jun 30, 2020, from $6.3 billion as of Jun 30, 2019. The company recently completed the sale of Australia and New Zealand (ANZ) operation to optimize its business structure and reduce debt.

Outlook

Given the recent favorable market trends, the company expects current-year sales volume to be down 4-7% compared with the previous guidance of a 5-10% decline. O-I Glass anticipates third-quarter sales volume to be approximately flat to slightly down compared with the prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -8.99% due to these changes.

VGM Scores

At this time, O-I Glass has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, O-I Glass has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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