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O-I Glass (OI) Inks Deal to Sell Cristar Tableware Business

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O-I Glass, Inc. (OI - Free Report) recently announced that its subsidiary has entered into a definitive agreement to sell Cristar TableTop S.A.S. (“Cristar”) to Vidros Colombia S.A.S, an affiliate of Nadir Figueiredo S.A. The sale would generate gross proceeds of approximately $95 million. This move is in sync with the company’s ongoing portfolio optimization program to exit non-core operations and invest further in its core business.

Cristar owns a dedicated tableware manufacturing plant in Buga, Colombia. It exports tableware across 40 countries globally. It generated an EBITDA of approximately $14.6 million during the last 12 months ended Sep 30, 2021. The transaction is anticipated to close during the first half of 2022, subject to customary regulatory approvals and other closing conditions.

Proceeds from the Cristar sale will be used to lower the company’s debt levels and fund its expansion plans. O-I Glass has plans in place to invest up to $680 million in new capacity through 2024, in order to achieve volume growth and meet demand. These investments are anticipated to generate an average internal rate of return of 20%. The plan includes an addition of up to 11 MAGMA lines.

Including this deal, O-I Glass has so far entered into agreements for $1.1 billion of asset sales as part of its overall $1.5 billion portfolio optimization program. The company recently announced its intention to sell its Le Parfait brand and business in France. O-I plans to complete the program in 2022, much ahead of its original target of 2024.

The company announced that it is retaining its fourth-quarter 2021 adjusted earnings guidance of approximately 30 cents to 35 cents per share. The mid-point of the guidance suggests a decline of 19% from the last year’s quarter’s earnings of 40 cents per share. Higher selling prices will partially offset elevated cost inflation (freight and energy). The Zacks Consensus Estimate for the quarter currently stands at 33 cents, indicating a 17.5% year-over-year decline.

O-I Glass had previously stated that it expects adjusted earnings per share in 2021 between $1.77 and $1.82. The mid-point of the range indicates an improvement of 47% from the adjusted earnings per share of $1.22 in 2020. The company anticipates higher selling prices to negate the impact of cost inflation. Benefits from its margin expansion initiatives, driven by improving productivity, operating performance and cost management, will also drive earnings for the year. The Zacks Consensus Estimate for the quarter is currently pegged at $1.80, indicating a 47% year-over-year growth.

The company anticipates a 2021 free cash flow of approximately $260 million, higher than $146 million of free cash flow generated in 2020. Cash provided by operating activities will be around $660 million for the year.

Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

Shares of the company have gained 0.3% so far this year against the industry’s decline of 26.9%.

Zacks Rank & Stocks to Consider

O-I Glass currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , SPX Flow and Emerson Electric Co. (EMR - Free Report) . While GEF and FLOW currently flaunt a Zacks Rank #1 (Strong Buy), EMR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Greif has an estimated earnings growth rate of 11.4% for the current year. In the past 30 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 2%.

So far this year, the company’s shares have gained 25.7%. Greif has a trailing four-quarter earnings surprise of 16.8%, on average.

SPX Flow has an expected earnings growth rate of 102% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

SPX Flow’s shares have risen 48.6% year-to-date. FLOW has a trailing four-quarter earnings surprise of 40%, on average.

Emerson Electric has a projected earnings growth rate of 19.9% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

EMR’s shares have appreciated 15.5% so far this year. Emerson Electric has a trailing four-quarter earnings surprise of 10.7%, on average.

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