The firm sees the price target as more realistic and in line with the market's volatility, but sees the potential for the shares of the glass container manufacturer to outperform in 2016 due to management changes expected at the end of this year and the recent acquisition of Vitro.
In May, Owens-Illinois agreed to acquire the Mexican food and beverage glass container company for about $2.15 billion. The deal is expected to close in May 2016 and may increase earnings, according to analysts.
Additionally, the company is benefitting from a strong dollar, since about 75% of its sales are produced internationally, but may be hurt from a strengthening euro.
Analysts also warned about other potential risks such as lack of price increases and unexpected sharp increases in inflation.
Separately, shares of OWENS-ILLINOIS INC (OI) stock are down today by $0.62 (2.74%) as of 11:42:57 AM. Thus far, 379.17K shares of OWENS-ILLINOIS INC exchanged hands as compared to its average daily volume of 2.07 million shares. The stock has ranged in price between $21.98 to $22.65 after opening the day at $22.26 as compared to the previous trading day's close of $22.63. Overall, OWENS-ILLINOIS INC is lagging the S&P 500 which is down 2.74%. Important items of note for OWENS-ILLINOIS INC and possible rationale for parts of today's stock move go as follows:
TheStreet Ratings team rates OWENS-ILLINOIS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate OWENS-ILLINOIS INC (OI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strongest point has been its expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over 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 ($2.18 versus $0.59).
- OI, with its decline in revenue, underperformed when compared the industry average of 0.4%. 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.
- 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.
- Net operating cash flow has decreased to -$278.00 million or 36.94% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.03% compared to the year-earlier quarter. Although its share price is down sharply from a year ago and the fact that OI is still more expensive than most of the other companies in its industry based on its current price-to-earnings ratio, we believe that other strengths that the company offers support our buy rating.
- You can view the full analysis from the report here: OI Ratings Report