Owens-Illinois Beats Q1 Earnings Ests - Analyst Blog

Owens-Illinois, Inc. OI reported a 3% improvement in its first-quarter 2014 adjusted earnings per share to 62 cents driven by higher sales volumes. Results beat the Zacks Consensus Estimate of 60 cents. Including one-time items, the company's earnings per share were 62 cents, up 29% from the 48 cents earned in the year-ago quarter.

Net sales, flat compared with the year-ago quarter, were at $1.64 billion, but surpassed the Zacks Consensus Estimate of $1.61 billion. The price was up modestly on a global basis, as a slight decline in Europe was offset by broad-based price gains in the Americas.

Volume, in terms of tons shipped, was up 2% year over year, marking the third quarter of volume increase after volume declines witnessed for straight seven quarters. Gains in Europe and North America and flat shipments in South America were partially offset by declines in Asia Pacific.
 
Operational Update
 
Cost of sales remained flat at $1.32 billion in the quarter. Gross profit edged up 1% year over year to $321 million from $319 million in the prior-year quarter. Selling and administrative expenses increased 3% to $133 million.

Segment operating profit decreased 4% year over year to $218 million. A 50% increase in operating profit in Europe, driven by volume and structural cost improvements from the asset optimization program was offset by a decline in operating profit in North America due to logistics headwinds from the harsh winter in the past quarter.

Profitability in South America declined, owing to a higher level of planned furnace rebuild activity and devaluation of the Brazilian real. Operating profit in Asia Pacific also declined affected by lower volume and higher costs

Financial Update
 
Cash and cash equivalents were $201 million as of Mar 31, 2014, compared with $383 million as of Dec 31, 2013. Long-term debt was $3.37 billion as of Mar 31, 2014, compared with $3.24 billion as of Dec 31, 2013. Cash utilized in continuing operating activities was $202 million in the quarter, compared with $134 million in the prior-year quarter.

Guidance
 
Owens-Illinois reiterated  its earnings per share guidance range of $2.80 to $3.20 for 2014. Free cash flow is projected to be approximately $350 million.

Owens-Illinois expects conditions in Europe to continue to slowly stabilize. The lingering impact of logistics challenges will likely affect profitability In North America in the second quarter. In South America, the company expects demand to be modestly higher than the lackluster demand witnessed in the prior-year period. Plant closures in China and the absence of recovery in the mature markets of Asia Pacific are expected to reduce sales in the region.
 
Owens-Illinois currently retains a Zacks Rank #3 (Hold).  Some better-ranked stocks in the retail sector include Crown Holdings Inc. CCK, Berry Plastics Group, Inc. BERY and Graphic Packaging Holding Co. GPK. While Crown Holdings carries a Zacks Rank #1 (Strong Buy), Berry Plastics Group and Graphic Packaging hold a Zacks Rank #2 (Buy).