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Why Is O-I Glass (OI) Down 3.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for O-I Glass (OI - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is O-I Glass due for a breakout? 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 catalysts.

O-I Glass Tops Q2 Earnings Estimates, Lowers '24 Outlook

O-I Glass reported second-quarter 2024 adjusted earnings per share (EPS) of 44 cents, which beat the Zacks Consensus Estimate of 42 cents. On a year-over-year basis, earnings fell 50%, reflecting lower demand. 

Including one-time items, O-I Glass reported an EPS of 36 cents for the quarter compared with 69 cents in the prior-year quarter.

Operational Update

Revenues were $1.73 billion for the quarter under review, down 8.5% from the year-ago quarter mainly due to lower average selling prices, unfavorable foreign currency translation and lower sales volume. The top line missed the Zacks Consensus Estimate of $1.75 billion. Sales volume (in tons) declined 4.5% in the quarter.

The cost of sales was down 3.3% year over year to $1.43 billion. Gross profit decreased 27.2% year over year to $303 million. The gross margin was 17.5% for the quarter under review, compared with 22% in the prior-year quarter. Selling and administrative expenses were down 23.1% year over year to $110 million.

Adjusted segment operating profit amounted to $233 million for the reported quarter, down from the prior-year period’s $326 million.

Segmental Performance

Net sales in the Americas segment fell 9.7% year over year to $899 million for the second quarter. Our model estimated the segment’s net sales to be $912 million. Operating profit was down 15.9% year over year to $106 million. The figure was lower than our estimate of $111 million. Gains from the slightly favorable net price were offset by an 8.5% drop in sales volumes (in tons). 

Net sales in the Europe segment were $802 million for the reported quarter, down 7.1% year over year. The figure was lower than our estimate of $849 million. The segment’s operating profit fell 36.5% year over year to $127 million. Our model had predicted an operating profit of $142 million.

Financial Update

O-I Glass had cash and cash equivalents of $671 million at the end of Jun 30, 2024, down from $913 million at 2023 end. The company generated $250 million of cash in operating activities in the quarter under review compared with the prior-year quarter’s $291 million.

Its long-term debt was $4.65 billion as of Jun 30, 2024, down from $4.7 billion as of Dec 31, 2023.

Outlook

Citing weak demand and planned temporary production curtailment to reduce inventory levels, OI lowered its projection for 2024. It expects adjusted earnings of $1.00-$1.25 per share, down from the previously stated $1.50-$2.00. Sales volume (in tons) is projected to be flat to down in the low-single digits. OI expects the 2024 free cash flow to be $50-$100 million, lowered from previously stated $100-$150 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -93.08% due to these changes.

VGM Scores

At this time, O-I Glass has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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. It's no surprise O-I Glass has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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