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Owens-Illinois (OI) Up 3.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Owens-Illinois (OI - Free Report) . Shares have added about 3.2% 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 Misses Earnings & Sales Estimates in Q4
 
Owens-Illinois reported fourth-quarter adjusted earnings of 61 cents per share, up 7% year over year. The figure was in line with management’s guidance. However, earnings missed the Zacks Consensus Estimate of 63 cents.
 
Including one-time items, the company reported loss from continuing operations of 78 cents per share in the reported quarter compared with a loss of 81 cents in the prior-year quarter.
 
Operational Update
 
Net sales declined 4.5% year over year to $1.64 billion, mainly due to a drop in shipment in the fourth quarter. Sales missed the Zacks Consensus Estimate of $1.68 billion.
 
Cost of sales declined 4% year over year to $1,341 million. Gross profit declined 8.1% year over year to $294 million. Selling and administrative expenses contracted 5% year over year to $116 million. Segment operating profit dropped 0.5% year over year to $211 million.
 
Segmental Performance
 
Net sales at the Americas segment declined 8% year over year to $861 million during the fourth quarter. Operating profit declined 18% year over year to $127 million. 
 
Net sales at the Europe segment were $560 million, down 0.5% year over year in the quarter.  Segment operating profit increased 30% year over year to $56 million driven by an increase in glass container shipments.
 
Net sales in the Asia Pacific region decreased 7% year over year to $184 million in the reported quarter. Operating profit doubled to $28 million from $14 million a year ago on lower operational costs.
 
Financial Update
 
Owens-Illinois had cash and cash equivalents of $512 million at the end of the 2018, up from $492 million at the end of 2017. The company generated $793 million of cash flow from operating activities during the 12-month period ended Dec 31, 2018, compared with $724 million in the comparable period last year. The company’s long-term debt declined to $5.2 billion as of Dec 31, 2018, compared with $5.1 billion as of Dec 31, 2017.
 
2018 Results
 
Owens-Illinois reported adjusted earnings per share of $2.72 in 2018, up 2.6% from $2.65 in the prior year. Earnings missed the Zacks Consensus Estimate of $2.74.
 
Sales were up 0.1% year over year to $6.88 billion from $6.87 billion in 2017. The top line missed the Zacks Consensus Estimate of $6.92 billion.
 
2019 Outlook
 
The company expects adjusted earnings to be around $3.00 a share. Cash provided by continuing operations is expected at $740 million and adjusted free cash flow is estimated at around $400 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -20.65% due to these changes.

VGM Scores

Currently, Owens-Illinois has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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.




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