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O-I Glass (OI) Shares Up 37% YTD: What's Driving the Rally?

O-I Glass, Inc.’s OI shares have gained 36.8% so far this year, as against the industry’s loss of 3.6%. Forecast-topping first-quarter 2021 results, increasing preference for glass packaging, investment in innovation and acquisitions have contributed to this impressive price performance.

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Let’s delve deeper and analyze the factors driving the stock.

Earnings & Sales Beat Q1 Estimates

O-I Glass reported first-quarter 2021 adjusted earnings of 35 cents per share, beating the Zacks Consensus Estimate of 28 cents. Revenues of $1500 million also surpassed the Consensus Mark of $1,460 million.

The company has a trailing four-quarters average earnings surprise of 29.7%.

Driving Factors

O-I Glass is witnessing increasing preference for sustainable glass packaging solutions and improved consumption trends. The company is gaining from the elevated off-premise sales, while on-premise consumption is anticipated to recover. Total consumption is likely to increase modestly, given the changing market dynamics and heightened social activity post pandemic. O-I Glass projects adjusted earnings per share for the current year to lie between $1.55 and $1.75. The mid-point of the guided range indicates a year-over-year improvement of 35%. Given the steady demand trend, sales and production volume will likely register double-digit growth compared to the prior-year levels.

The company’s top priority remains investments in business. It intends to achieve this by investing in joint ventures (JVs) and incremental capacity, and through bolt-on acquisitions in emerging geographies, while delivering a solid return on invested capital. The company announced its plan to invest roughly $75 million in an expansion at its Zipaquirá, Colombia facility, in order to meet the heightening demand for highly sustainable glass packaging. Notably, the facility will be one of O-I Glass’ largest and cost-effective plants.

Moreover, O-I Glass is driving innovation in the glass segment. Its glass melting technology, known as the MAGMA program, intends to reduce the amount of capital required to install, rebuild and operate the company’s furnaces. Last year, the company divested its Australia and New Zealand (ANZ) glass manufacturing business to Visy Industries. Following the sale, O-I Glass continues to strengthen its leading market position across Europe and the Americas, and develop interests in Asia.

The company is committed to deliver margin expansion through improving productivity, operating performance and cost reduction, and anticipates benefits of around $50 million from these actions. It is focused on reducing debt and optimizing its portfolio with a strategic divestiture program. These moves will generate solid growth, higher margins, enhance business portfolio and strengthen the balance sheet.

Positive Growth Projection

The company’s earnings estimate for the current year is pegged at $1.65 per share at present, suggesting year-over-year growth of 35.2%.

Zacks Rank & Stocks to Consider

O-I Glass currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industrial products sector are Tennant Company TNC, Encore Wire Corp. WIRE and Arconic Corp. ARNC. All of these stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant has an anticipated earnings growth rate of 49.5% for 2021. The company’s shares have gained around 18%, year to date.

Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. Year to date, the company’s shares have rallied nearly 36%.

Arconic has a projected earnings growth rate of 447% for the current year. The stock has appreciated around 21%, so far this year.

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OI Glass, Inc. (OI): Free Stock Analysis Report
 
Encore Wire Corporation (WIRE): Free Stock Analysis Report
 
Tennant Company (TNC): Free Stock Analysis Report
 
Arconic Corporation (ARNC): Free Stock Analysis Report
 
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