A Stock That’s Hard to Contain

07/05/2007 12:00 am EST


Dan Sullivan

Editor, The Chartist

Dan Sullivan, editor of The Chartist, says container maker Owens-Illinois has reported blow-out earnings and has a strong chart pattern to boot.

As one of the world’s largest glass and plastics packaging companies, Owens-Illinois (NYSE: OI) supplies containers for a wide variety of food, beverage, beer, health care, household, and drug and chemical products. Approximately 50% of the glass containers made worldwide are manufactured by OI, its international affiliates or its licensees.

The company’s glass-containers segment offers a wide range of shapes and sizes for food, beer, wine spirits and other nonalcoholic beverages. Its containers are used by many of the best-known consumer- products companies in the world. In addition, OI is a technological leader in the fields of health care packaging and specialty closure systems, including tamper-evident and child-resistant closures, prescription bottles and other medical devices.

The key to OI’s success is its ability to deliver both innovation in its packaging products and low-cost production. In 2005 it built the world’s most modern glass-manufacturing facility in Windsor, Colorado. As part of its global expansion strategy, the Perrysburg, Ohio company established a European headquarters in Lausanne, Switzerland. Also, since 1991 it has acquired 18 glass-container businesses in 18 different countries and six plastic-packaging companies in 11 different countries.

Its global expansion efforts have paid off. In 2006, Europe accounted for 43% of sales, followed by North America (33%), Asia/Pacific, and South America (12% each). In the first quarter, profits more than doubled to $53.2 million, or 30 cents a share, from a year earlier. Revenue rose 11% to $1.87 billion. The consensus estimate was for earnings of 16 cents per share and revenue of $1.78 billion, (so OI topped both forecasts—Editor). The strong results were due to improved glass volumes and product mix, as well as favorable exchange rates, mainly in Europe and Australia.

[So far this year], the stock has [nearly doubled], including a 15.9% gap higher on April
26 when it announced its first-quarter earnings. Currently, it trades near its 52-week high (just below $36 in Thursday’s trading). Also, it trades well above its up-trending 50-and 200-day moving averages.

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