Markets

Will Owens-Illinois (OI) Beat Earnings on Stable Volumes? - Analyst Blog

Owens-Illinois, Inc . OI is set to release second-quarter 2015 results after the market closes on Jul 29. In the last quarter, the manufacturer of glass containers delivered a positive surprise of 4.76%. The company has delivered positive earnings surprises in three of the trailing four quarters with an average beat of 1.27%. Let's see how things are shaping up for this announcement.

Factors to Consider

In the second quarter, Owens-Illinois expects to benefit from stable market and volume trends but currency headwinds will persist. Continued pricing pressure and lower production linked to a heavier furnace rebuild schedule in the first half of the year will impact results in the quarter.

Owens-Illinois initiated a $100 million accelerated stock repurchase program in Feb 2015. The company intends to repurchase at least $25 million additional shares over the course of the year. This will be accretive to earnings.

The company's ongoing asset optimization program has improved productivity in Europe. Through this program, the company expects to enhance long-term profitability in the region through investments and by addressing higher cost facilities to better align its European manufacturing footprint with market and customer needs

On the flipside, slowdown in beer demand in North America will affect the company's results. In South America, Owens-Illinois expects growth to pause in 2015, as profits will be dampened by decline in production volume in the Andean countries due to lower buffer stock requirements from Brazil and the U.S. Further, Owens-Illinois will also face difficult comparisons in the first half of the year in Brazil due to the volume uptick related to the Soccer World Cup in 2014. Sales and production will decline in the first half of 2015 and also in Australia.

Earnings Whispers

Our proven model does not conclusively show that Owens-Illinois is likely to beat earnings estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The ESP for Owens-Illinois is 1.72%. This is because the Most Accurate estimate of 59 cents is higher than the Zacks Consensus Estimate of 58 cents.

Zacks Rank: Owens-Illinois' Zacks Rank #3 when combined with a positive ESP makes us confident of an earnings beat. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

Berry Plastics Group, Inc. BERY has an earnings ESP of +7.84% and a Zacks Rank #3. It is expected to report results on Jul 31.

Casella Waste Systems Inc. CWST has an earnings ESP of +150% and a Zacks Rank #3. It is expected to report results on Jul 29.

TASER International Inc. TASR has an earnings ESP of +22.22% and a Zacks Rank #3. It is expected to report results on Jul 30.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

OWENS-ILLINOIS (OI): Free Stock Analysis Report

CASELLA WASTE (CWST): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

TASER INTL INC (TASR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

BERY CWST OI

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More