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Here's Why You Should Consider Investing in O-I Glass (OI)
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O-I Glass, Inc. (OI - Free Report) is poised to gain on the growing global preference for glass as the healthy, premium and sustainable packaging option for food and beverage. The company’s investment in incremental capacity to capitalize on this trend will fuel growth. Its ongoing divestiture program, acquisitions, and product innovation are likely to act as key catalysts. The company’s cost-control measures and efforts to improve productivity and efficiency will bolster margins.
The company currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of the company have gained 17.4% so far this year, against the industry’s decline of 15.5%.
Image Source: Zacks Investment Research
Let’s delve into the factors that make the company a smart investment choice at the moment.
Solid Q1 Earnings Performance
O-I Glass’ first-quarter 2022 adjusted earnings per share improved 60% year on year to 56 cents. The bottom line came in higher than the company’s guidance of 38 cents to 43 cents. The upside was driven by gains from higher sales volumes and production, favorable pricing, and benefits from OI’s ongoing margin expansion initiatives.
O-I Glass has surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 18.9%.
Upbeat Outlook for 2022
O-I Glass anticipates strong demand for healthy, sustainable glass containers to continue this year, thereby supporting its earnings. The company projects adjusted earnings per share between $1.85 and $2.10 for the current year. The mid-point of the range indicates an improvement of 8% from adjusted earnings per share of $1.83 in 2021.
Higher selling prices are likely to negate the impact of cost inflation. Benefits from its margin expansion initiatives, through improving productivity, operating performance and cost management, will drive bottom-line growth for the year.
Superior Return on Equity (ROE)
O-I Glass’ trailing 12-month ROE supports its growth potential. The company’s ROE of 43.7% is much higher than the industry’s average ROE of 40.7%, reflecting that it is more efficient in utilizing shareholders’ funds.
Upbeat Growth Projections
The Zacks Consensus Estimate for fiscal 2022 earnings per share is currently pegged at $2.04, indicating growth of 11.5% from the prior year. The same for fiscal 2023 stands at $2.12, suggesting a year-over-year improvement of 3.6%.
The stock has an estimated long-term earnings growth rate of 7%.
Growth Drivers in Place
Demand for glass packaging has increased, given its recyclability, and being a healthier and safer alternative to plastic packaging. O-I Glass is thus investing in incremental capacity, joint ventures and acquisitions in emerging geographies to capitalize on this trend. The company has plans in place to invest up to $680 million in new capacity through 2024 to achieve volume growth and meet demand. These investments are anticipated to generate an average internal rate of return of 20%. The plan includes an addition of up to 11 MAGMA lines.
Per its ongoing divestiture program, which is aimed at optimizing structure, exiting non-core operations and investing in its core business, O-I Glass has already generated $1.3 billion of proceeds. The company is set to achieve its targeted $1.5 billion by the end of this year, way ahead of its original target of 2024. Proceeds from the portfolio optimization program will be utilized to fund attractive expansion projects and improve financial strength.
Other Stocks to Consider
Some other top-ranked stocks worth considering in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation (PKG - Free Report) . While GPK and MYE flaunt a Zacks Rank #1, PKG carries a Zacks Rank #2.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 4% in the past three months.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% year-to-date.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 10% in the past three months.
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Here's Why You Should Consider Investing in O-I Glass (OI)
O-I Glass, Inc. (OI - Free Report) is poised to gain on the growing global preference for glass as the healthy, premium and sustainable packaging option for food and beverage. The company’s investment in incremental capacity to capitalize on this trend will fuel growth. Its ongoing divestiture program, acquisitions, and product innovation are likely to act as key catalysts. The company’s cost-control measures and efforts to improve productivity and efficiency will bolster margins.
The company currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of the company have gained 17.4% so far this year, against the industry’s decline of 15.5%.
Image Source: Zacks Investment Research
Let’s delve into the factors that make the company a smart investment choice at the moment.
Solid Q1 Earnings Performance
O-I Glass’ first-quarter 2022 adjusted earnings per share improved 60% year on year to 56 cents. The bottom line came in higher than the company’s guidance of 38 cents to 43 cents. The upside was driven by gains from higher sales volumes and production, favorable pricing, and benefits from OI’s ongoing margin expansion initiatives.
O-I Glass has surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 18.9%.
Upbeat Outlook for 2022
O-I Glass anticipates strong demand for healthy, sustainable glass containers to continue this year, thereby supporting its earnings. The company projects adjusted earnings per share between $1.85 and $2.10 for the current year. The mid-point of the range indicates an improvement of 8% from adjusted earnings per share of $1.83 in 2021.
Higher selling prices are likely to negate the impact of cost inflation. Benefits from its margin expansion initiatives, through improving productivity, operating performance and cost management, will drive bottom-line growth for the year.
Superior Return on Equity (ROE)
O-I Glass’ trailing 12-month ROE supports its growth potential. The company’s ROE of 43.7% is much higher than the industry’s average ROE of 40.7%, reflecting that it is more efficient in utilizing shareholders’ funds.
Upbeat Growth Projections
The Zacks Consensus Estimate for fiscal 2022 earnings per share is currently pegged at $2.04, indicating growth of 11.5% from the prior year. The same for fiscal 2023 stands at $2.12, suggesting a year-over-year improvement of 3.6%.
The stock has an estimated long-term earnings growth rate of 7%.
Growth Drivers in Place
Demand for glass packaging has increased, given its recyclability, and being a healthier and safer alternative to plastic packaging. O-I Glass is thus investing in incremental capacity, joint ventures and acquisitions in emerging geographies to capitalize on this trend. The company has plans in place to invest up to $680 million in new capacity through 2024 to achieve volume growth and meet demand. These investments are anticipated to generate an average internal rate of return of 20%. The plan includes an addition of up to 11 MAGMA lines.
Per its ongoing divestiture program, which is aimed at optimizing structure, exiting non-core operations and investing in its core business, O-I Glass has already generated $1.3 billion of proceeds. The company is set to achieve its targeted $1.5 billion by the end of this year, way ahead of its original target of 2024. Proceeds from the portfolio optimization program will be utilized to fund attractive expansion projects and improve financial strength.
Other Stocks to Consider
Some other top-ranked stocks worth considering in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation (PKG - Free Report) . While GPK and MYE flaunt a Zacks Rank #1, PKG carries a Zacks Rank #2.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 4% in the past three months.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% year-to-date.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 10% in the past three months.