A month has gone by since the last earnings report for Owens-Illinois (OI - Free Report) . Shares have added about 17.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Owens-Illinois due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Owens-Illinois Q3 Earnings In line, Revenues Miss Estimates
Owens-Illinois delivered third-quarter 2018 adjusted earnings of 75 cents per share, which came in line with management’s guidance as well as the Zacks Consensus Estimate despite unfavorable foreign currency effect and temporary soft volumes. Earnings however declined 3% on a year-over-year basis.
Owens-Illinois’ net sales declined 3% year over year to $1.73 billion, mainly due to the adverse impact of a stronger U.S. dollar. Revenues missed the Zacks Consensus Estimate of $1.76 billion.
Global sales shipments decreased 2% year over year in the third quarter. Sales in Europe were lower than prior year, despite higher shipments to non-alcoholic beverage customers. Shipments to wine customers declined due to the weak grape harvest in the prior year and to food customers due to mix management. Within the Americas, lower shipments in the United States – owing to shifting production to the its joint venture with Constellation Brands as well as due to the ongoing weakness in beer, were mitigated by gains reported in other regions. Shipments in Asia Pacific were lower year on year, mainly due to Australia, which reported strong sales in the comparable period. Shipments in the rest of the region were up nearly 10% from the prior-year quarter.
Cost of sales edged down 2% year over year to $1.41 billion. Gross profit declined 8% year over year to $342 million. Selling and administrative expenses went down 4% year over year to $115 million. Segment operating profit dipped 2% year over year to $255 million. Excluding an adverse impact from foreign currency, segment operating profit rose 2%. Improved pricing helped counter operating costs in the quarter. Segment operating profit in Europe was higher year on year, nearly flat in the Americas and lower in Asia Pacific. Segment operating profit margin expanded 20 basis points to 14.7%.
Owens-Illinois had cash and cash equivalents of $440 million at the end of the third quarter, up from $339 million witnessed at the end of the year-ago quarter. The company generated $99 million of cash in operating activities during the nine-month period ended Sep 30, 2018, compared with $39 million reported in the comparable period last year. The company’s long-term debt decreased to $5.5 billion as of Sep 30, 2018, compared with $5.4 billion as of Sep 30, 2017.
Owens-Illinois launched its $400-million share repurchase program during first-quarter 2018. So far in 2018, Owens-Illinois has repurchased a total of 5.4 million shares for approximately $107 million.
The company lowered adjusted earnings per share guidance range to $2.72-$2.78 for 2018 from its previous guidance of $2.75-$2.85. The company’s efforts to drive operational improvements are partially mitigating incremental pressure from the strong US dollar and lower-than-expected sales volumes in the back half of the year.
Cash provided by continuing operating activities is expected to be approximately $750-$775 million, lower than the previously guided $800 million, while adjusted free cash flow will likely be at $350-$375 million, compared with the prior expectation of $400 million. The impact of currency continues to weigh on cash generation translated into US dollars.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Owens-Illinois has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Owens-Illinois has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.