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Reasons Why You Should Avoid Investing in O-I Glass (OI) Now
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O-I Glass (OI - Free Report) has failed to impress investors as it has been witnessing a decline in volumes for the past four quarters. This mainly reflects the lower customer spending amid inflationary pressures and high interest rates.
The Zacks Rank #4 (Sell) company has a market capitalization of $2.7 billion.
Price Performance
The company’s shares have lost 19.2% over the past six months compared with the industry’s 8.5% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that are taking a toll on the company.
OI’s net sales in the third quarter of 2023 were $1.74 billion, which were 3% higher than the year-ago quarter as higher selling prices helped offset the impact of lower volumes. Glass container shipments, in tons, were down approximately 15% in the third quarter of 2023. This followed a 9% decline in the second quarter and 8% in the first quarter.
This downward trend in volumes was mainly attributed to significant destocking across the value chain, as the company’s customers, distributors and retailers adjusted their inventory management practices to lower levels. This reflects the current sluggish demand amid high-interest rates and cost inflation.
Due to these factors, O-I Glass anticipates sales volumes to decline in the double digits in 2023 compared with its previous expectation of a decline in mid-single to high-single digits. The company has been intensifying production curtailment activity in the fourth quarter to reduce inventory and properly position itself for the expected market recovery in 2024.
Volumes in the fourth quarter are thus expected to decline by double digits. For the fourth quarter of 2023, O-I Glass expects adjusted earnings at around 3 cents per share. Compared with earnings per share of 38 cents in the fourth quarter of 2022, the projected figure indicates a year-over-year slump of 92%. The company expects higher curtailment costs to impact fourth-quarter results by approximately 30 cents per share more than the previously anticipated figure.
Reflecting these headwinds, the Zacks Consensus Estimate for the company’s 2023 earnings has been revised 6% downward in the past 30 days.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Resideo Technologies, Inc. (REZI - Free Report) , Applied Industrial Technologies (AIT - Free Report) and A. O. Smith Corporation (AOS - Free Report) .
The Zacks Consensus Estimate for Resideo Technologies’ 2023 earnings per share is pegged at $1.48. The consensus estimate for 2023 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 5.7%. REZI shares have gained 7% in the past six months.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 21% in the past six months.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares gained 13.5% in the last six months.
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Reasons Why You Should Avoid Investing in O-I Glass (OI) Now
O-I Glass (OI - Free Report) has failed to impress investors as it has been witnessing a decline in volumes for the past four quarters. This mainly reflects the lower customer spending amid inflationary pressures and high interest rates.
The Zacks Rank #4 (Sell) company has a market capitalization of $2.7 billion.
Price Performance
The company’s shares have lost 19.2% over the past six months compared with the industry’s 8.5% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that are taking a toll on the company.
OI’s net sales in the third quarter of 2023 were $1.74 billion, which were 3% higher than the year-ago quarter as higher selling prices helped offset the impact of lower volumes. Glass container shipments, in tons, were down approximately 15% in the third quarter of 2023. This followed a 9% decline in the second quarter and 8% in the first quarter.
This downward trend in volumes was mainly attributed to significant destocking across the value chain, as the company’s customers, distributors and retailers adjusted their inventory management practices to lower levels. This reflects the current sluggish demand amid high-interest rates and cost inflation.
Due to these factors, O-I Glass anticipates sales volumes to decline in the double digits in 2023 compared with its previous expectation of a decline in mid-single to high-single digits. The company has been intensifying production curtailment activity in the fourth quarter to reduce inventory and properly position itself for the expected market recovery in 2024.
Volumes in the fourth quarter are thus expected to decline by double digits. For the fourth quarter of 2023, O-I Glass expects adjusted earnings at around 3 cents per share. Compared with earnings per share of 38 cents in the fourth quarter of 2022, the projected figure indicates a year-over-year slump of 92%. The company expects higher curtailment costs to impact fourth-quarter results by approximately 30 cents per share more than the previously anticipated figure.
Reflecting these headwinds, the Zacks Consensus Estimate for the company’s 2023 earnings has been revised 6% downward in the past 30 days.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Resideo Technologies, Inc. (REZI - Free Report) , Applied Industrial Technologies (AIT - Free Report) and A. O. Smith Corporation (AOS - Free Report) .
REZI currently sports a Zacks Rank #1 (Strong Buy), and AIT and AOS carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Resideo Technologies’ 2023 earnings per share is pegged at $1.48. The consensus estimate for 2023 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 5.7%. REZI shares have gained 7% in the past six months.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 21% in the past six months.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares gained 13.5% in the last six months.