Will Elevated Costs Impact Owens-Illinois' (OI) Q4 Earnings?

Owens-Illinois, Inc.OI is scheduled to report fourth-quarter and full-year 2017 results on Feb 6, after the market closes .

In the last quarter, Owens-Illinois posted earnings of 77 cents per share, beating the Zacks Consensus Estimate by 5.5%. Moreover, the company's earnings surpassed estimates in each of the trailing four quarters, recording an average positive earnings surprise of 8.31%.

Let's see how things are shaping up for this announcement.

Owens-Illinois, Inc. Price and EPS Surprise

Owens-Illinois, Inc. Price and EPS Surprise | Owens-Illinois, Inc. Quote

Key Factors to Consider

Owens-Illinois expects its adjusted earnings per share for 2017 to be in the range of $2.60-$2.65. The mid-point of the guidance range reflects year-over-year growth of 14%. Its focus on total systems cost improvement is estimated to yield $35-$45 million in segment operating profit for the full year.

For full-year 2017, the company remains on track to achieve all financial targets, including volume growth, margin, adjusted earnings, and cash flow and deleveraging. It also continues to successfully execute strategic initiatives in commercial activities, end-to-end supply chain management and working capital reduction.

Notably, Owens-Illinois' performance in Europe has improved in 2017. Its fourth-quarter results will benefit from modest sales growth and ongoing benefits from Total System Cost initiatives in Europe. For 2017, the company projects higher profits and strong margin expansion in the region.

However, Owens-Illinois witnessed some escalation in freight costs and disruptions in truck availability due to the hurricanes in September 2017. The impact of hurricanes is expected impede the fourth-quarter results as well. Additionally, uncertainty in macroeconomic conditions and currency rates will hamper full-year 2017 results.

Earnings Whispers

Our proven model does not conclusively show that Owens-Illinois is likely to beat on earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of 53 cents and the Zacks Consensus Estimate of 54 cents, is -0.19%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Owens-Illinois currently carries a Zacks Rank #3. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Share Price Performance

The company's price performance has been impressive over the past year. Its shares have rallied 20.1% in a year's time, outperforming the industry 's gain of 5.6%.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

ACCO Brands Corporation ACCO , with an Earnings ESP of +0.76% and a Zacks Rank #2. Its shares have gained 12.4%, over the past six months. You can see the complete list of today's Zacks #1 Rank stocks here .

Astec Industries, Inc. ASTE , with an Earnings ESP of +10.00% and a Zacks Rank #2. The stock has gained 29.5% in six months' time.

Altra Industrial Motion Corp. AIMC , with an Earnings ESP of +1.03% and a Zacks Rank #3. The company's shares have been up 18.1% during the same time frame.

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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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