Owens-Illinois, Inc. (OI - Free Report) stock looks promising at the moment. We are positive on the company’s prospects and believe that this is the right time to add the stock to your portfolio, as it is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make Owens-Illinois an attractive investment option.
What’s Working in Favor of Owens-Illinois?
Solid Q2: Owens-Illinois reported second-quarter 2017 adjusted earnings per share of 75 cents, comfortably beating the Zacks Consensus Estimate of 67 cents by a wide margin of 12%. In addition, earnings jumped 15% year over year and exceeded management’s guidance range.
Upbeat Guidance: Owens-Illinois raised its earnings per share guidance for 2017, reflecting consistent solid operating performance, favorable currency translation and a lower tax rate. Adjusted earnings per share are now projected in the range of $2.55-$2.65. The mid-point of the guidance range reflects 12.6% year-over-year growth. For 2017, the company remains on track to achieve all financial targets, including volume growth, margin, adjusted earnings, cash flow and deleveraging.
Ahead of the Industry: Owens-Illinois has significantly outperformed the industry with respect to price performance in a year's time. Shares of the company have gained around 38%, while the industry registered growth of 22%.
Favorable Zacks Rank & Score: Owens-Illinois currently carries a Zacks Rank #2 (Buy) and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. Owens-Illinois’ score is a weighted combination of these three scores. Such a score allows investors to eliminate the negative aspects of stocks and select winners. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1(Strong Buy) or #2, offer the best upside potential.
Impressive Surprise History: Owens-Illinois outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The company has an average positive earnings surprise of 7.7%.
Cheaper Valuation: Owens-Illinois’ trailing 12-month price earnings (P/E) ratio is 9.9, while the industry's average trailing 12-month P/E ratio is 10.7. Consequently, the stock is cheaper at this point.
Estimates Moving Up: Annual estimates for Owens-Illinois have moved north in the past 60 days, reflecting analysts’ confidence in the stock following upbeat second-quarter results. During this period, the Zacks Consensus Estimate for 2017 moved up nearly 5.2% to $2.63. The Zacks Consensus Estimate for 2018 also moved 4.9% upward to $2.80.
Superior Return on Equity (ROE): Owens-Illinois’ ROE of 72.2%, as compared with the industry average of 45.4%, reflects the company’s efficiency in utilizing shareholders’ funds.
Growth Drivers: Owens-Illinois is poised to gain from its continuous focus on simplifying the organization and boosting productivity. The company continues to successfully execute its strategic initiatives in commercial activities, end-to-end supply chain management and working capital reduction. Despite escalating expenses, it continues to benefit from the key account management program rolled out in 2016. It has estimated long-term earnings growth rate of 9.65%.
Other Stocks to Consider
Other top-ranked stocks in the industrial product space include Terex Corporation (TEX - Free Report) , Caterpillar Inc. (CAT - Free Report) and Komatsu Ltd. (KMTUY - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Terex has expected long-term earnings growth rate of 19.7%.
Caterpillar has expected long-term earnings growth rate of 9.5%.
Komatsu has expected long-term earnings growth rate of 12.7%.
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