With Owens-Illinois, the message in a bottle is an income statement

Posted Feb 21st 2008 6:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Owens-Illinois is worth an evaluation.

Owens-Illinois, Inc. (NYSE: OI) is the world's largest maker of glass containers. Owens makes a variety of containers, including bottles in a wide range of shapes and sizes used to hold beer, soft drinks, liquor, wine, juice, and other beverages.

Analysts really like Owens' market-leading positions in the Americas, Europe, and Asia/Pacific. Analysts also like OI's blue-chip clientele list.

Analysts also see mid-single-digit revenue growth in F2008 and F2009, on adequate European demand and modest volume growth in North America. Rising demand for wine, beer, and soft drink products in Latin America, Asia and Eastern Europe, also bodes well, longer-term. Pricing power is adequate, and margins should improve. The Reuters FY 2008/FY 2009 EPS consensus estimates for OI are $4.03 to $4.70.

The risks? A weaker euro, or a rise in commodity prices would hurt OI's results. Analysts are also keeping an eye on OI's operating costs.

The First Call mean rating for OI is: Buy [9 firms]. Mean 2008 target: $63 [high: $65, low: $59].

Stock Analysis: Owens-Illinois is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from OI's shares. Sell/Stop Loss if you were to purchase shares in this company: $34.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: beverages, containers, glass, OI, Owens-Illinois