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Owens-Illinois (OI) Upgraded to Buy on Estimate Revisions


On Oct 13, 2016, Zacks Investment Research upgraded Owens-Illinois, Inc. OI to a Zacks Rank #2 (Buy). Going by the Zacks model, companies holding a Zacks Rank #2 have strong chances of outperforming the broader market over the next few quarters.

With positive estimate revisions over the last 30 days and an encouraging guidance for 2016, Owens-Illinois emerges as an attractive investment opportunity.

Rising Estimates & Encouraging Guidance Back Upgrade

Over the past 30 days, Owens-Illinois saw the Zacks Consensus Estimate rise by 1 cent or 1.5% to 67 cents per share. The company also delivered positive earnings surprises in the last four quarters with an average beat of 7.12%.

OWENS-ILLINOIS Price and Consensus


Owens-Illinois’ second-quarter 2016 adjusted earnings per share of 65 cents outpaced the Zacks Consensus Estimate. Earnings also jumped 8.3% year over year and came in at the high end of management’s guidance of 60–65 cents per share. Net sales also improved 14% year over year to $1.76 billion, surpassing the Zacks Consensus Estimate.

Buoyed by the better-than-expected results, the company maintained its adjusted earnings per share guidance for 2016 in the range of $2.25–$2.35. Free cash flow generation is expected to be approximately $300 million. The company is targeting 1% volume growth for 2016 and a 100 basis points expansion in segment margins.

Acquisition and Investments

Adding to the positives, the acquisition of Vitro's food and beverage business will provide Owens-Illinois a competitive edge in the attractive and growing glass segment of the packaging market in Mexico. The buyout has been a key driver for both the company’s top- and bottom-line results in the quarter.

Further, Owen-Illinois’ joint venture (JV) with Constellation Brands reflects the company’s commitment to grow in the Mexico and Central America markets. The JV has been exhibiting a better-than-expected performance and should begin supplementing the company’s growth in the Mexico market.

In Europe, the asset optimization program is enabling improved productivity. Through this program, the company expects to improve long-term profitability in this region on the back of investments and by addressing higher cost facilities to better align its European manufacturing footprint with market and customer needs.

Stocks to Consider

Other well-ranked industrial product stocks are Brady Corp. BRC, AGCO Corp. AGCO and ACCO Brands Corp. ACCO.

Brady Corp. has posted an average positive earnings surprise of 31.49% over the last four quarters. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corp., which carries a Zacks Rank #2, delivered an average positive earnings surprise of 62.51% over the trailing four quarters.

ACCO Brands Corp., also a Zacks Rank #2 stock, posted an average positive earnings surprise of 23.96% over the trailing four quarters.

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