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Reasons Why You Should Avoid Investing in O-I Glass (OI) Now

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O-I Glass (OI - Free Report) has failed to impress investors as it has been witnessing a decline in volumes for the last eight consecutive quarters. This decline in volumes is mainly due to inventory destocking actions, weak consumer demand in a few markets and elevated macroeconomic pressure.

This Zacks Rank #5 (Strong Sell) company has a market capitalization of $1.85 billion.

Price Performance

The company’s shares have lost 43.9% over the past year compared with the industry’s 38.7% decline.

Zacks Investment Research
Image Source: Zacks Investment Research

Let’s discuss the factors that are taking a toll on the company.

Top & Bottom Lines Decline Y/Y in Q1: O-I Glass reported first-quarter 2024 revenues of $1.59 billion, which were down 13% from the year-ago quarter. This was attributed to lower volumes due to weak consumer demand and inventory destocking across the value chain. Earnings per share were 45 cents, which marked a 65% plunge from the year-ago quarter due to lower revenues and segment operating profit, and higher interest expenses.

Declining Volume Trends: O-I Glass has been witnessing a decline in volumes over the past few quarters and the trend began with a 0.1% dip in the second quarter of 2022.  This trend worsened over subsequent quarters, with the company reporting a substantial 17% drop in the fourth quarter of 2023 and a 13% decline in sales volumes in the first quarter of 2024.

The factors contributing to this include inventory destocking efforts, subdued consumer demand in select markets and heightened macroeconomic pressures.

Lower Expectations for 2024: O-I Glass heightened its production curtailment activities in the fourth quarter of 2023, aiming to diminish inventory and strategically position itself for an anticipated market recovery in 2024. The company expects a slight recovery in volumes in 2024, reflected in its sales volume guidance (in tons), which is projected to be flat to up in the low-single digits. However, the persistence of the current inflationary situation poses a risk to the guidance.

Additionally, elevated interest expenses, resulting from current payment schedules following recent refinancing activities, are expected to hurt the company’s earnings in the ongoing year. Consequently, O-I Glass anticipates adjusted earnings in the range of $1.50-$2.00 per share, down from the previously stated range of $2.25-$2.65. In comparison with earnings per share of $3.09 in 2023, the mid-point of the current range indicates a year-over-year decline of 43%.

Downward Revision Activity in Estimates: Reflecting these headwinds, the Zacks Consensus Estimate for the company’s 2024 earnings has been revised 11% downward in the past 30 days. The consensus estimate for the year is currently pegged at $1.67 per share, which indicates a 46% year-over-year plunge.

Stocks to Consider

Some better-ranked stocks from the Industrial Products sector are Brady (BRC - Free Report) , Crane Company (CR - Free Report) and Eaton Corporation (ETN - Free Report) , carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Brady’s 2024 earnings is pegged at $4.13 per share, which indicates year-over-year growth of 13.5%. The consensus estimate has moved up 3% in the past 30 days. The company has a trailing four-quarter average earnings surprise of 6.7%. BRC shares have gained 36.5% in the past year.

Crane has an average trailing four-quarter earnings surprise of 15.2%. The Zacks Consensus Estimate for CR’s 2024 earnings is pinned at $4.99 per share, which indicates year-over-year growth of 16.3%. Estimates have moved 1% north in the past 30 days. The company’s shares have gained 79% in the past year.

The Zacks Consensus Estimate for ETN’s 2024 earnings has moved up 1% over the past 30 days and is currently pegged at $10.56 per share. The consensus estimate indicates year-over-year growth of 15.8%. The company has a trailing four-quarter average earnings surprise of 4.7%. Eaton’s shares have gained 66% in the past year.


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