Owens-Illinois (OI) Up on Q1 Earnings Beat; '16 View Raised

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 Inc. (OI) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Operational Update

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.

Financial Update

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).

Peer Performance

Bemis Company, Inc.'s BMS first-quarter adjusted earnings per share dropped 1.6% year over year to 60 cents per share. Earnings also lagged the Zacks Consensus Estimate of 62 cents.

AptarGroup, Inc. ATR reported first-quarter 2016 earnings per share of 71 cents, which improved 3% year over year from 69 cents per share but fell short of the Zacks Consensus Estimate by a penny. Earnings were within the company's guided range of 69-74 cents per share.

Sealed Air Corporation's SEE first-quarter 2016 adjusted earnings per share of 50 cents decreased 7% year over year. The figure, however, surpassed the Zacks Consensus Estimate of 48 cents, posting a positive surprise of 4%.

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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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