Owens-Illinois (OI) Stock Gains on Vitro Acquisition

NEW YORK (TheStreet) -- Shares of Owens-Illinois (OI) were gaining 9.7% to $26.10 on heavy trading volume Wednesday after the beer and wine bottle maker announced it will acquired Mexican glass container manufacturer Vitro for $2.15 billion in cash.

Vitro is the largest supplier of glass containers in Mexico, and will give Owens-Illinois a competitive position "in the attractive and growing glass segment of the packaging market in Mexico," according to the company. The acquisition includes all of Vitro's five plants in Mexico and one in Bolivia.

Owens-Illinois expects Vitro to generate about $945 million annually following the acquisition.

The acquisition is expected to close within the next 12 months.

About 2.5 million shares of Owens-Illinois were traded by 10:22 a.m. Wednesday, above the company's average trading volume of about 1.7 million shares a day.

TheStreet Ratings team rates OWENS-ILLINOIS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate OWENS-ILLINOIS INC (OI) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OI, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 13.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • OWENS-ILLINOIS INC's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, OWENS-ILLINOIS INC reported lower earnings of $0.59 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $0.59).
  • The gross profit margin for OWENS-ILLINOIS INC is currently lower than what is desirable, coming in at 25.55%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 4.99% is above that of the industry average.
  • The debt-to-equity ratio is very high at 4.00 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, OI has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Containers & Packaging industry and the overall market, OWENS-ILLINOIS INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: OI Ratings Report
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