Citi Boosts Owens Illinois To Buy: Earnings Inflection Point Coming

Shares of Owens-Illinois Inc OI have collapsed 35 percent over the past 12 months, with the company issuing three consecutive guidance cuts. Citi’s Anthony Pettinari upgraded the rating for the company from Neutral to Buy, while raising the price target from $15 to $19.

Owens-Illinois had issued guidance cuts due to forex headwinds, weak European pricing and sluggish volumes. Investor sentiment had become more negative given changes in senior management, operational missteps and an increase in leverage after the Vitro acquisition.

Earnings Inflection Point

Following 18 months of negative revisions, analyst Anthony Pettinari sees an earnings inflection point in 2016. He expects Owens-Illinois to generate EPS growth of 11 percent from 2016 to 2018, backed by the company stabilizing pricing, reaping volume benefits from recently renegotiated contracts, improving its operations and paying down debt.

Low Bar For 2016 Guidance

The management team has been changed completely over the past 18 months, with a new CEO, CFO and CMO as well as 4 new regional heads. Pettinari believes that the new team has set “beatable targets.” He added, “We acknowledge OI is a show me story, and expect reiteration of FY ’16 guidance when OI reports May 2 AMC to be a catalyst for the stock.”