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O-I Glass (OI) Up 10.9% 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 10.9% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

O-I Glass Earnings & Revenues Beat Estimates in Q1

O-I Glass reported first-quarter 2021 adjusted earnings of 35 cents per share, reflecting a 15% fall from the prior-year quarter highlighting recent divestitures. However, the bottom line surpassed the Zacks Consensus Estimate of 28 cents and came within management’s guidance of earnings between 32 cents and 37 cents.

Excluding the impact of recent divestitures, sales volume was consistent with last year despite the impact of severe weather that disrupted operations in Texas, Oklahoma and Mexico, and COVID-19 related restrictions. Favorable market trends, strong operating performance and the company’s margin enhancement initiatives somewhat helped offset the impact of severe weather.

Including one-time items, the company reported loss per share of 62 cents in the quarter, against an earnings per share of 32 cents in the prior-year quarter.

Operational Update

Revenues declined 4% year over year to $1,500 million during the March-end quarter. The top line declined on the Australia and New Zealand ("ANZ") businesses divestment. Adjusted for divestitures, net sales increased $66 million aided by higher average selling prices, favorable mix and beneficial foreign currency translation. Notably, the top line outpaced the Zacks Consensus Estimate of $1,460 million.

Cost of sales was down 3% year over year to $1,256 million. Gross profit slid 9% year on year to $244 million. Selling and administrative expenses fell 12% year over year to $102 million.

Segment operating profit amounted to $175 million in the reported quarter, down from the prior-year quarter’s $176 million. Despite the July 2020 divestiture of the company’s ANZ business, which had contributed $12 million of segment operating profit in first-quarter 2020, the segment operating profit came in-line with the prior-year quarter. Sales volume was stable with prior-year levels, excluding the impact from recent divestitures. Ongoing strong operating performance and the benefits from margin enhancement initiatives offset the significant impact of severe weather.

Segmental Performance

Net sales in the Americas segment inched up 1.1% year over year to $837 million in the first quarter. Operating profit was down 3% year on year to $100 million.

Net sales in the Europe segment were $639 million in the reported quarter, up 11% year over year. The segment’s operating profit was up 23% year over year to $75 million.

Financial Update

O-I Glass had cash and cash equivalents of $742 million at the end of the first quarter of 2021, up from the $563 million witnessed at the end of 2020. The company utilized $56 million of cash from operating activities in the first quarter of 2021 compared with the prior-year quarter’s $315 million, reflecting improved working capital management. Its long-term debt was at $5.17 billion as of Mar 31, 2021, from $4.9 billion as of Dec 31, 2020.

Outlook

O-I Glass projects adjusted earnings per share for the ongoing year between $1.55 and $1.75. For the current quarter, the company anticipates adjusted earnings between 45 cents and 50 cents per share. Higher selling prices are expected to offset cost inflation. It expects double-digit sales and production volume improvement from the prior-year quarter. Notably, the company’s sales and production volume was significantly impacted by the pandemic induced disruption.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 19.24% due to these changes.

VGM Scores

At this time, O-I Glass has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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