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Owens-Illinois (OI) Beats on Q4 Earnings, '18 View Upbeat

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Owens-Illinois, Inc. (OI - Free Report) reported fourth-quarter 2017 adjusted earnings of 55 cents per share, up 10% year over year, ahead of the Zacks Consensus Estimate of 52 cents. The uptick primarily reflected the benefits of the company’s global focus on reducing Total Systems Cost.
Including one-time items, the company reported a loss per share of 81 cents compared with a loss per share of 43 cents in the prior-year quarter.
Operational Update
Owens-Illinois’ net sales were up around 4% year over year to $1.71 billion but fell short of the Zacks Consensus Estimate of $1.72 billion.
The improvement in net sales was due to a 1% increase in price on a global basis and favorable currency translation. Global sales volumes were flat from the prior-year quarter.

Owens-Illinois, Inc. Price, Consensus and EPS Surprise

Owens-Illinois, Inc. Price, Consensus and EPS Surprise

Owens-Illinois, Inc. price-consensus-eps-surprise-chart | Owens-Illinois, Inc. Quote

Also, shipments in Latin America improved 2% mainly due to higher beer and non-alcoholic beverage shipments and improvements in Brazil. Sales volume in the Asia-Pacific region dipped 2% as higher food volumes were offset by lower shipments of beer. In Europe, shipments inched up 1% chiefly due to higher shipments for wine and beer. Meanwhile in North America, shipments were flat as higher food shipments offset lower beer volumes.

Adjusted cost of sales flared up 4.7% year over year to $1.4 billion. Adjusted gross profit ascended 2% to $320 million from $313 million recorded in the year-earlier quarter. Selling and administrative expenses edged down 5% to $122 million. Segment operating profit improved 5% year over year to $212 million. Segment operating profit margin expanded 20 basis points to 12.4% in the quarter.

Financial Update

Owens-Illinois had cash and cash equivalents of $492 million at the end of 2017, flat compared at the end of 2016. The company’s cash from operations was $724 million during 2017, compared with $758 million recorded last year. Adjusted free cash flow for the year was $393 million, ahead of the management’s guidance of $365 million.

Owens-Illinois’ long-term debt increased to $5.12 billion at the end of 2017 compared with $5.13 million reported at the end of 2016.

The company continues to make solid progress on executing its strategic initiatives. Its focus on total systems cost contributed approximately $39 million in cost savings in 2017.

The company’s Board of Directors authorized a $400 million share repurchase program. Owens-Illinois expects to repurchase about $100 million in shares in 2018.

2017 Performance

Owens-Illinois’ adjusted earnings for 2017 came in at $2.65, a 15% improvement year over year. Earnings beat the Zacks Consensus Estimate of $2.64 and were also at the upper end of the company’s guided range of $2.60-$2.65. Net sales were up around 2% from the year-ago quarter to $6.87 billion but fell short of the Zacks Consensus Estimate of $6.88 billion.

Including one-time items, earnings per share in 2017 was $1.11, down 16% from $1.32 in 2016.

2018 Guidance

The company guides adjusted earnings in the range of $2.75-$2.85 per share. The mid-point of the range reflects a 6% year-over-year improvement. Higher segment profit is expected to lead to higher earnings in 2018. Cash, provided by continuing operating activities is expected to be approximately $800 million, whereas adjusted free cash flow is expected to be approximately $400 million. 

Share Price Performance

In the past year, Owens-Illinois has outperformed its industry with respect to price performance. The stock has gained around 11%, while the industry dipped 2.4% during the same time frame.
Zacks Rank & Key Picks
Owens-Illinois carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same space include H&E Equipment Services, Inc. (HEES - Free Report) , Caterpillar Inc. (CAT - Free Report) and Komatsu Ltd. (KMTUY - Free Report) . While H&E Equipment flaunts a Zacks Rank # 1 (Strong Buy), Caterpillar and Komatsu carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
H&E Equipment Services has an expected long-term earnings growth rate of 18.6%. The company’s shares have surged 50% over the past three months.
Caterpillar has an expected long-term earnings growth rate of 10.3%. Its shares have appreciated 43% over the last three months.
Komatsu has an expected long-term earnings growth rate of 16.2%. Its shares have gone up 51% over the past year.
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