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O-I Glass (OI) Expands Transformation Plan, Raises Guidance for 2021
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O-I Glass, Inc. (OI - Free Report) plans to accelerate its transformation initiatives in a bid to meet the growing demand for glass products. To that end, the company is investing in the MAGMA technology in order to enhance its glass production process over the long term.
MAGMA is the company’s breakthrough glass melting technology, which intends to reduce the amount of capital required to install, rebuild and operate its furnaces. The full-scale commercial MAGMA production line is now operational. The early 2021 installation in Germany marks a key milestone, and creates an avenue for broader deployment in 2022 and beyond. It is on track to pilot the Generation 2 MAGMA line in Streator, IL, and expects to complete the development of a Generation 3 in 2025. Glass products are in demand as it is a healthy, premium and sustainable option for food and beverage. MAGMA helps strengthen glass’ position as the most sustainable packaging material.
The company is taking few initiatives as part of its transformation plan for 2022 through 2024. O-I Glass expects its margin expansion initiative will likely generate annual benefits of $50 million over 2022 to 2024. The company intends to invest up to $680 million in new capacity over the next three years period, in order to achieve volume growth and meet demand. These investments are expected to generate an average internal rate of return of 20%. The plan includes an addition of up to 11 MAGMA lines. These investments will expand the company’s franchise foothold in high growth and high value markets in Latin America. This plan also targets to increase portfolio optimization to $1.5 billion by 2024.
The management anticipates adjusted earnings per share (EPS) to improve between $2.20 and $2.40 by 2024, highlighting 8-12% CAGR earnings growth over the next three years. The adjusted free cash flow is estimated to increase between $400 million and $450 million, while the leverage ratio is expected to be 3.5 times by the end of 2024.
The company has updated its third-quarter and full-year guidance. It now expects adjusted EPS for the third quarter to be at the high end or slightly above the prior guidance of 47-52 cents. For 2021, O-I Glass now expects the adjusted EPS to lie between $1.70 and $1.75, up from the prior guidance of $1.65 and $1.75. Free cash flow is expected to be roughly $260 million for the year.
Price Performance
Shares of the company have appreciated 29.2% so far this year, against the industry’s decline of 17.3%.
Other top-ranked stocks in the Industrial Products sector include Deere & Company (DE - Free Report) , Alcoa Corporation (AA - Free Report) and AGCO Corporation (AGCO - Free Report) . While Deere and Alcoa flaunt a Zacks Rank #1, AGCO carries a Zacks Rank of 2, at present.
Deere has a projected earnings growth rate of 117.5% for fiscal 2021. So far this year, the company’s shares have gained 32.2%.
Alcoa has an estimated earnings growth rate of 573.2% for 2021. The company’s shares have rallied 121.2%, so far this year.
AGCO has an expected earnings growth rate of 70.7% for 2021. The stock has appreciated 27.1%, year to date.
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O-I Glass (OI) Expands Transformation Plan, Raises Guidance for 2021
O-I Glass, Inc. (OI - Free Report) plans to accelerate its transformation initiatives in a bid to meet the growing demand for glass products. To that end, the company is investing in the MAGMA technology in order to enhance its glass production process over the long term.
MAGMA is the company’s breakthrough glass melting technology, which intends to reduce the amount of capital required to install, rebuild and operate its furnaces. The full-scale commercial MAGMA production line is now operational. The early 2021 installation in Germany marks a key milestone, and creates an avenue for broader deployment in 2022 and beyond. It is on track to pilot the Generation 2 MAGMA line in Streator, IL, and expects to complete the development of a Generation 3 in 2025. Glass products are in demand as it is a healthy, premium and sustainable option for food and beverage. MAGMA helps strengthen glass’ position as the most sustainable packaging material.
The company is taking few initiatives as part of its transformation plan for 2022 through 2024. O-I Glass expects its margin expansion initiative will likely generate annual benefits of $50 million over 2022 to 2024. The company intends to invest up to $680 million in new capacity over the next three years period, in order to achieve volume growth and meet demand. These investments are expected to generate an average internal rate of return of 20%. The plan includes an addition of up to 11 MAGMA lines. These investments will expand the company’s franchise foothold in high growth and high value markets in Latin America. This plan also targets to increase portfolio optimization to $1.5 billion by 2024.
The management anticipates adjusted earnings per share (EPS) to improve between $2.20 and $2.40 by 2024, highlighting 8-12% CAGR earnings growth over the next three years. The adjusted free cash flow is estimated to increase between $400 million and $450 million, while the leverage ratio is expected to be 3.5 times by the end of 2024.
The company has updated its third-quarter and full-year guidance. It now expects adjusted EPS for the third quarter to be at the high end or slightly above the prior guidance of 47-52 cents. For 2021, O-I Glass now expects the adjusted EPS to lie between $1.70 and $1.75, up from the prior guidance of $1.65 and $1.75. Free cash flow is expected to be roughly $260 million for the year.
Price Performance
Shares of the company have appreciated 29.2% so far this year, against the industry’s decline of 17.3%.
Zacks Rank & Other Stocks to Consider
O-I Glass currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks in the Industrial Products sector include Deere & Company (DE - Free Report) , Alcoa Corporation (AA - Free Report) and AGCO Corporation (AGCO - Free Report) . While Deere and Alcoa flaunt a Zacks Rank #1, AGCO carries a Zacks Rank of 2, at present.
Deere has a projected earnings growth rate of 117.5% for fiscal 2021. So far this year, the company’s shares have gained 32.2%.
Alcoa has an estimated earnings growth rate of 573.2% for 2021. The company’s shares have rallied 121.2%, so far this year.
AGCO has an expected earnings growth rate of 70.7% for 2021. The stock has appreciated 27.1%, year to date.