Shares of Owens-Illinois, Inc. (OI - Free Report) hit a 52-week low of $16.76 on Jun 22, closing a notch higher at $16.86.
The stock has depreciated 20% so far this year, performing even worse than the industry’s 19% decline. This underlines the impact of decline in beer consumption in the domestic market.
Let’s delve deeper to analyze the factors affecting this Zacks Rank #4 (Sell) company’s performance.
What’s Dragging the Stock Down?
Notably, Owens-Illinois is facing troubles from falling consumer demand, increasing competition and tougher market access. Intense competition from other well established glass container manufacturers, such as Compagnie de Saint-Gobain, Anchor Glass Container Corp. and Ardagh Group S.A. (ARD - Free Report) , also remains another major headwind.
In the past month, Owens-Illinois has finalized plans to cease production at its Atlanta, GA, plant mainly due to continued decline of beer consumption in the domestic market. This facility is likely to be shut down on or after Jul 18, 2018.
Furthermore, competition from manufacturers of alternative forms of packaging, such as aluminum cans and plastic containers, is a key concern. Advantages in price, quality, and functional attributes of these alternative containers may lead to customers considering a change of suppliers or the form of packaging, which could affect Owens-Illinois.
For second-quarter 2018, Owens-Illinois expects adjusted earnings of nearly 75 cents per share, flat year over year. Further, interest in taxes will be higher than the prior year. Improvement in ongoing business operations will be offset by investments in assets and new technology developments compared with the prior-year quarter.
In addition, the company’s interest expense is likely to flare up due to higher variable rates in the United States as well as the strengthening euro. Despite Owens-Illinois’ deleveraging and refinancing actions over the past 12 months, its debt-to-capitalization ratio remains high at 84%, which is a concerning factor.
Furthermore, the maker of glass container products has an unimpressive VGM Score of C. Also, the Zacks Consensus Estimate for 2018 and 2019 earnings has been revised 0.7% downward, over the past 30 days. This reflects analysts’ bearish sentiments, which is likely to keep the stock under pressure in the coming quarters.