Owens-Illinois Hits 52-week low: Should You Dump It Now? - Analyst Blog

Shares of Owens-Illinois, Inc. ( OI ) have lost much of its momentum and hit a 52-week low of $27.80 yesterday. Though the company's share price has been declining since it posted weak Q2 results on Jul 29, we believe the current fall is because of a weaker outlook for the third quarter, due to be released on Oct 29.

Shares of this Zacks Rank #5 (Strong Sell) stock closed at $28.10 on Sep 18, with a negative year-to-date return of 21.45%.

What Led to the Drop?

Shares of Owens-Illinois dipped 9% in a day on Sep 17, following the announcement that it expects third-quarter earnings to be at least 5% lower than the year-ago comparable quarter figure, due to lower sales.

Compared with the 79 cents earned in the year-ago quarter, this translates to earnings per share of 75 cents. The figure is much lower than the Zacks Consensus Estimate for the quarter, which currently stands at 87 cents, reflecting 10% year-over-year growth.

Owen-Illinois expects volume to decline across most of the regions, barring South America, in the quarter. In North America, sales volume will be down in the low single-digits, while Asia Pacific will witness a double-digit decline. Whereas in Europe, volumes will be modestly lower than the prior-year quarter. The only outperformer, South America, will see volumes rise in the mid-single digits led by the Andean countries.

Segment profit will be up year over year in Europe driven by savings from asset optimization. South America segment profit will also rise year over year due to benefit of non repetition of one-off events in the prior year. Profit in North America will be lower because of poor operating performance, while at Asia Pacific it will be down due to restructuring in Australia.

Owens-Illinois' share price has been declining ever since it reported soft second-quarter earnings results on Jul 29. Earnings declined 1% to 80 cents per share as improved performance in South America was offset by declines in other regions, particularly in Asia Pacific.

Volume, in terms of tons shipped, was down 1% year over year in the second quarter as a 27% contraction in volumes in the Asia Pacific offset the volume increase in other parts of the world. This was mainly due to Owens-Illinois's reduced presence in China and weak demand in Australia.

All of the company's fiscal 2014 estimates moved downward in the past 60 days, following the weak Q2 results. The Zacks Consensus Estimate for fiscal 2014 declined 2% to $2.97 per share over the same time frame.

Other Stocks to Consider

Other better performing stocks worth considering in the packaging sector include Sealed Air Corporation ( SEE ), Graphic Packaging Holding Co. ( GPK ) and Sonoco Products Co. ( SON ). While Sealed Air sports a Zacks Rank #1 (Strong Buy), Graphic Packaging and Sonoco Products hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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