Owens-Illinois, Inc. - Value
April 19 2012 - 8:00PM
Zacks
Owens-Illinois, Inc. (OI) recently provided a
better-than-expected first quarter update with earnings expected to
surge 35% over the first quarter of 2010. Shares jumped on the news
but this Zacks #2 Rank (Buy) still has plenty of value. OI trades
with a forward P/E of just 8.4.
Owens-Illinois is the largest glass manufacturer in
the world. The company produces glass containers for a variety of
products including food, tea, juice, beer, wine and
pharmaceuticals. It was the first to use an automatic bottle making
machine in production.
Founded in 1903 and headquartered in Perrysburg,
Ohio, it has a large international presence with international
headquarters in Switzerland, Australia and Brazil. It has 81 plants
in 21 countries.
"Encouraging Early Performance"
On Apr 10, Owens-Illinois announced that first
quarter earnings results would exceed the results of Q1 in 2011 by
"more than 35%". The company made 47 cents in the year ago
quarter.
The results were driven by good manufacturing
performance as facilities had higher productivity rates.
The quarter was also boosted by 2012 price
increases designed to offset unrecovered prior year inflation and
anticipated 2012 inflation.
What About Europe?
While Owens-Illinois was encouraged by the first
quarter, "conflicting customer demand patterns", especially in
Europe, continue to impact 2012 visibility.
In other words, the company isn't sure what's going
to happen with European demand for the rest of 2012.
The Zacks Consensus Estimate for 2012
Jumps
Given the magnitude of the upside expected in the
first quarter, it's not surprising that the analysts have been
scrambling to raise full year estimates.
In just the last 7 days, 3 analysts have raised
full year estimates.
This has boosted the Zacks Consensus Estimate to
$2.88 from $2.83 in that time. The consensus called for $2.75 just
90 days ago.
That is earnings growth of 21.5% as Owens-Illinois
made $2.37 per share in 2011.
Still a Value Stock
Even though shares got a boost from the update on
the first quarter, they are still well below 52-week highs.
![](http://www.zacks.com/images/upload_dir/1334860818.jpg)
But there's plenty of value.
In addition to a P/E that is under 10, it also has
a stellar price-to-sales ratio of just 0.5. A P/S under 1.0 usually
indicates a company is undervalued.
It's price-to-book ratio, at 4.0, is a little
hotter than I normally look for. The cut-off I use for P/B is under
3.0. However, the strong P/S ratio still indicates to me that
there's a lot of value in the shares.
The company also has other solid fundamentals
including a 1-year return on equity (ROE) of 21%. That is well
above the average for the S&P 500 of 13.4%.
Owens-Illinois is expected to report first quarter
results on Apr 26. We'll hear more from the company then about
what's really going on in Europe and its other international
markets.
Until then, Owens-Illinois is a value stock with
double digit growth and an "encouraging" first quarter
performance.
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Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
@TraceyRyniec.
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