O-I Glass, Inc. (OI) in Perrysburg, Ohio, is a leading producer of glass bottles and jars globally.  On Jan. 12, 2022, it announced that its wholly-owned subsidiary, Paddock Enterprises, LLC, has filed  a reorganization and related disclosure statement with the United States Bankruptcy Court for the District of Delaware. According to Its CEO, Andres Lopez, “This Plan represents a favorable outcome for all parties, and we look forward to the Plan’s implementation as Paddock moves toward emergence.”

OI’s shares have gained 24.8% in price over the past month to close yesterday’s trading session at $13.72. Its third-quarter results exceeded expectations on solid operating performance, and it also reported its lowest debt since 2015. In addition, it raised its full-year 2021 outlook. 

OI now expects its adjusted earnings to be between $1.77 -$1.82 per share, versus the prior guidance of $1.70 - $1.75 per share. Also, it expects its cash provided by operating activities to be at least $660 million. So, its near-term prospects look promising.

Here is what could influence OI’s performance in the near term:

Ongoing Portfolio Optimization Program

On Dec. 27, 2021, OI announced that one of its subsidiaries had agreed to sell Cristar TableTop S.A.S. to Vidros Colombia S.A.S. for roughly $95 million. The deal is part of OI’s ongoing portfolio optimization program. Lopez said, “We are deploying proceeds from the sale of non-core assets to help fund our expansion plan, leveraging our exciting new MAGMA solution, that includes investment with attractive returns.”

Including this divestiture, OI has entered into sales agreements approximating $1.10 billion as part of its overall $1.50 billion portfolio optimization program. It expects to complete the current program in fiscal 2022, ahead of its original 2024 target.

Impressive Financials

OI’s net sales were  $1.61 billion for the third quarter, ended September 30, 2021, versus $1.62 billion in the year-ago period. However, its gross profit was t $302 million, up 9% year-over-year. Its non-GAAP earnings increased 44.6% year-over-year to $94 million, while its non-GAAP EPS increased 41.5% year-over-year to $0.58. Also, its net debt was  $4.30 billion compared to $4.77 billion in the prior-year quarter.

Favorable Analyst Estimates

OI’s revenue is expected to increase 3.3% in its fiscal 2021 and 2% for the quarter ending March 31, 2022. The company’s EPS is expected to rise 48.4% in fiscal 2021 and 7.2% in fiscal 2022. Moreover, its EPS is expected to grow at a 20.2% rate per annum over the next five years. And Wall Street analysts expect the stock to hit $15.13 in the near term, which indicates a potential 10.3% upside.

POWR Ratings Reflect Rosy Prospects

OI has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. OI has a B grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase.

The stock has a B grade for Value, which is in sync with its 1.05x and 0.36x respective forward EV/S and P/S, which are lower than the 1.85x and 1.56x industry averages.

OI is ranked #9 of 23 stocks in the B-rated Industrial – Packaging industry. In addition to the POWR Rating grades I have just highlighted, we have also rated the stock for Momentum, Stability, Sentiment, and Quality. Get all the OI ratings here.

Bottom Line

OI has been making several operational changes as part of its ongoing portfolio optimization program. On the sustainability front, on January 18, it was recognized as a 2021 regional top-rated performer by Sustainalytics. Furthermore, its revenue and EPS are expected to soar in the upcoming months. So, we think it could be wise to scoop up its shares now.

How Does O-I Glass (OI) Stack Up Against its Peers?

While OI has an overall POWR Rating of B, one might also want to consider investing in Industrial - Packaging stocks having an A (Strong Buy) rating: Greif, Inc. (GEF) and Veritiv Corporation (VRTV).

OI shares were unchanged in premarket trading Friday. Year-to-date, OI has gained 14.05%, versus a -5.94% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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