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O-I Glass (OI) Down 8.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for O-I Glass (OI - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is O-I Glass due for a breakout? 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 catalysts.

O-I Glass Q3 Earnings Beat Estimates, Raises '21 View

O-I Glass reported third-quarter 2021 adjusted earnings of 58 cents per share, up 41% from the prior-year quarter’s 41 cent per share. The bottom line beat the Zacks Consensus Estimate of 52 cents. The upbeat results can be attributed to higher selling prices and continued solid operating and cost performance supported by the company’s Margin Expansion initiatives.

Including one-time items, the company reported EPS of 48 cents in the quarter under review compared with $2.06 in the prior-year quarter.

Operational Update

Revenues dipped 0.4% year over year to $1,609 million in the quarter under review. Gains from higher selling prices and favorable foreign currency translation were offset by weaker sales volumes and a dip in revenues from technical services due to lower engineering project activity. The top line missed the Zacks Consensus Estimate of $1,616 million.

Demand for glass containers remained strong through the quarter but sales volume was down primarily due to choppy demand patterns, mix management and ongoing supply chain disruptions. Excluding the impact of recent divestitures, sales volume was down 1% from the prior-year period.

Cost of sales was down 2% year over year to $1,307 million. Gross profit increased 9% year on year to $302 million. Selling and administrative expenses flared up 13.7% year over year to $108 million.

Segment operating profit amounted to $243 million in the reported quarter, up from the prior-year quarter’s $204 million.

Segmental Performance

Net sales in the Americas segment grew 4% year over year to $925 million in the third quarter. Operating profit went up 18% year over year to $133 million.

Net sales in the Europe segment were $655 million in the reported quarter, up 1.7% year over year. The segment’s operating profit improved 25% year over year to $110 million.

Financial Update

O-I Glass had cash and cash equivalents of $628 million at the end of the third quarter of 2021, up from the $606 million at the end of the prior-year quarter. The company generated $306 million of cash from operating activities in the third quarter of 2021 compared with the prior-year quarter’s $262 million. Its long-term debt stood at $4.8 billion as of Sep 30, 2021, down from $5.2 billion as of Sep 30, 2020.

As part of its ongoing portfolio optimization program, the company recently announced that it will sell its Le Parfait brand and business in France at an attractive valuation, which also includes a long-term strategic supply agreement.

Outlook

O-I Glass now projects adjusted EPS between $1.77 and $1.82 for the current year, up from its prior guidance of $1.70 to $1.75. It expects to generate free cash flow of $260 million in 2021.

For the current quarter, the company anticipates adjusted earnings between 30 cents and 35 cents per share. Higher selling prices are expected to offset cost inflation. Sales volume will be in-line with prior year levels given the ongoing supply chain challenges. The company expects earnings to reflect solid operating performance and cost savings from its Margin Expansion initiatives.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, O-I Glass has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. 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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