Owens-Illinois, Inc . OI reported first-quarter 2016 adjusted earnings per share of 48 cents, outpacing the Zacks Consensus Estimate of 40 cents per share, highlighting a positive earnings surprise of 20%.
Earnings also increased 33% year over year on a constant currency basis and outpaced management's guidance of 37 to 42 cents, thanks to strong business performance and favorable currency translation. Shares of Owens-Illinois went up 0.81% in after-hours trading following the upbeat results.
Including one-time items, the company reported earnings of 42 cents per share in the quarter, down 5% from the year-ago quarter.
Owens-Illinois' net sales increased 12% year over year to $1,588 million, surpassing the Zacks Consensus Estimate of $1,528 million. Currency headwinds had a negative impact of approximately $62 million or 4% on sales. The newly acquired food and beverage business contributed $210 million to sales while in terms of constant currency, net sales of the legacy business, excluding the acquired business, edged up 1%. On a global basis, price was up about 1%.
The company reported a 14% rise in sales volume during the quarter. Excluding the acquisition, volumes were in line with the year-ago quarter. Including the acquired business, volumes improved 9% in North America and 85% in Latin America.
Europe and Asia Pacific shipments rose modestly due to higher beer and non-alcoholic beverage shipments in Europe and wine in Asia Pacific. North America legacy business volumes were on par with the prior-year quarter as higher wine and food shipments offset lower shipments in other categories. Shipments for the Latin America legacy business dipped 5% as lower shipments in Brazil were partially offset by higher shipments in the Andean region.
Cost of sales increased 10% to $1.27 billion in the quarter. Gross profit increased 19% to $319 million from $268 million in the prior-year quarter. Selling and administrative expenses increased 4% to $129 million.
Segment operating profit improved 26% year over year to $211 million driven by improvement across all regions on a constant currency basis. Segment operating profit margin expanded 150 basis points to 13.3% in the quarter aided by strong operational performance as well as the impact of the acquisition of Vitro's food and beverage business.
Owens-Illinois had cash and cash equivalents of $239 million at the end of the first quarter of 2016. The company used $301 million of cash in operations in the quarter. The company's long-term debt was at $5.66 billion as of Mar 31, 2016.
The company stated that it will amend its annual report on Form 10-K for the year ended Dec 31, 2015, in order to record its total asbestos-related liability in relevant prior-year periods.
Owens-Illinois hiked its adjusted earnings per share guidance for 2016 to the range of $2.25 to $2.35, from the prior $2.10 to $2.25. Free cash flow generation is expected to be approximately $300 million, $20 million higher than the previous forecast. Expectations for strong business performance through the year, favorable tax expectations at the low end of the guidance range of 26 to 28% and favorable currency assumptions led to the raised guidance.
Owens-Illinois currently carries a Zacks Rank #2 (Buy).
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