Owens-Illinois Shares Dip on Lower Q3 Earnings Outlook - Analyst Blog

Shares of Owens-Illinois, Inc. ( OI ) plunged 8.8% yesterday after the company slashed its third-quarter earnings guidance and now expects it to be at least 5% lower than the year-ago comparable quarter figure, due to lower sales.

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.

In the year-ago quarter, Owens-Illinois had reported adjusted earnings of 79 cents per share, this when compared with the projection of a 5% decline for third-quarter fiscal 2014, results of which are expected on Oct 29, 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.

Owens-Illinois reported a 1% decline in its second-quarter 2014 adjusted earnings per share to 80 cents. Improved performance in South America was offset by declines in other regions, particularly in Asia Pacific. Net sales edged up 1% to $1.8 billion, Pricing was up a modest 1% on a global basis, as a slight decline in Europe was offset by broad-based price gains in the Americas. Currency effect was favorable with a stronger euro more than offsetting a weaker Brazilian real and Australian dollar.

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.

Owens-Illinois currently holds a Zacks Rank #4 (Sell). Some better-performing stocks worth considering in the packaging sector include Sealed Air Corp. ( 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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