Owens-Illinois Continues to Grow

Owens-Illinois is seeing big global profits in glass containers as sales grew 16.4% in the first quarter. The company has surprised on estimates each of the last four quarters by an average of 66.17%. O-I's forward P/E is only 9.33.

Full Analysis

Owens-Illinois, Inc. (OI) is the largest glass manufacturer in the world and the first to use an automatic bottle making machine in production.

Founded in 1903, the company, which is headquartered in Perrysburg, Ohio, also has a European headquarters in Lausanne, Switzerland, as part of its strategy to expand global operations. O-I now has 83 manufacturing facilities in 22 countries.

O-I, a Zacks #1 Rank (Strong Buy), produces containers for a host of different products in various industries including, food, tea, juice, beer, liquor, wine and pharmaceuticals.

Owens-Illinois Beats Wall Street Estimates by 36.71% in the First Quarter

On Apr 30, Owens-Illinois reported first quarter estimates that surprised on estimates by 35.71%, or 29 cents per share. First quarter earnings increased 215% to $174 million, or $1.08 per share, compared to $55.3 million, or 31 cents per share in the year-ago period, excluding a one-time restructure charge of $9.7 million, or 6 cents per share.

The company attributed the earnings rise to improvement in price and product sales mix. Higher energy costs and raw materials, as well as transportation costs, ate into the improvement gains however.

Sales rose 16.4% to $1.961 billion from $1.684 billion in the first quarter of 2007. Favorable currency exchange added $187 million and increased price and product sales racked up another $119 million.

The company said rising energy and raw material costs are going to make 2008 a challenge.

"But I remain confident in the capabilities and dedication of O-I employees to ensure that the strategies we've put into place will deliver solid results," said Al Stroucken, Chairman and Chief Executive Officer.

"Going forward, we will continue to identify opportunities to expand our footprint in attractive geographies and to work with our customers to develop innovative glass packaging that will help distinguish their brands in the marketplace," he said.

Estimates Rise for the Second Quarter and the Full Year

Responding to the fourth consecutive quarterly surprise on earnings, brokerage analysts have been raising estimates in the last 60 days on the second quarter and the full year. Second quarter consensus estimates rose three cents to $1.23 from $1.20 per share in the last two months.

For the full year, consensus estimates are up 9.4% to $4.50 from $4.11 per share in the last 60 days. Covering analysts estimate year-over-year 2008 earnings growth of 52.89%.

Owens-Illinois looks cheap at its current valuations. Its forward P/E is only 9.88, under the industry average of 24.42. The company's price-to-book is 2.99. O-I also has an amazing five year average return on equity [ROE] of 41.33%.

Comments

[ernie schubert:]

With all the glowing reports of how OI is doing Earnings are off the
charts. Why then is OI dropping in value and such a fast pace? I own
about300 shares. I am retired from OI-36 years. I would like to know
if OI will get back to where it was. Analysts insist the stock will grow
to 66.00 dollars a share. Yours truly, ernie schubert 6-24-08

2008 Jun 24 01:15 PM

[Christopher...:]

Yeah, this stock strikes me as a sleeper...No one (including cramer) has said a word about this stock during its fall from the highs of 60 a share. Also, I like the 70% exposure overseas...Europe and China actually act on green legislation and have enough intelligence to switch from plastic containers to glass. It's economically viable, and less likely to have litigation cases from toxins causing cancer...(look how GE was burned)

2008 Jun 25 05:33 PM

[Frankie62:]

I'm wondering how much the cost of power will affect OI - for manufacturing and transportation. What is their source of fuel? They are making all glass containers now so they don't need oil for materials, since they sold their plastic devision. And what about their debt - I would prefer it to be lower. Supposedly about 75% of their customers are overseas. Disclosure - I do own OI.

2008 Jul 03 12:23 PM

[Frankie62:]

I agree this stock is a sleeper. Since I own it I hope it wakes up. Even though they recently sold their plastics division so they don't need oil for supply stock, I wonder what their source of fuel is - glass melts at a high temperature. Their transportation costs are probably going up and their debt seems a tad high to me. Supposedly 75% of their business comes from overseas. On the whole it sounds like a good investment to me - so why has the price dropped so much? Anyone??

2008 Jul 03 12:30 PM

[The-Yellow-...:]

I am looking heavily at OI and plan do listen to the last CC and investigate further. We are in a bear market and many are concerned about the transportation costs eating into margins and perhaps other factors (is glass more expensive than plastic?)...

John Montgomery, one of my favorite mutual fund managers, has held this for quite some time based on its quants. I still have to do the heavy DD but it is looking very promising...

BTW... for those interested I have a financial website at the address above.......

2008 Jul 07 11:46 AM

[The-Yellow-...:]

to the left of the page rather.

2008 Jul 07 11:47 AM