A New Play For An Old TimerBy
Guess who's attracting new interest in the volatile upstart IPO market? None other than one of those old, big blue chips, Owens-Illinois. This major producer of glass and plastic packaging containers was acquired in a leveraged buyout by KKR in 1987. On Dec. 11, KKR took it public again by selling 60 million shares at 11 apiece. The hot offering quickly shot up to 14, before cooling down to 12.
"At its current price, the stock is truly cheap--it's one of the world's largest packagers and makes one of every two glass containers produced worldwide," says Stuart Shikiar, managing director of Prudential Investment Management, which oversees assets of $2 billion. He figures that the stock has a lot of elbow room on the upside, perhaps to the mid-20s over the next 12 to 18 months. "It's a global-class company that dominates a huge industry and is selling at a modest price-earnings ratio of 10," he adds.
Owens-Illinois is a "perfect economic-recovery play," Shikiar notes, because the container and packaging business definitely benefits from any rise in business activity. As a low-cost producer, Owens-Illinois' operating profit margin has been widening. So earnings are pointing up, he adds. Shikiar projects earnings of 90 a share for this year and $1.25 next year, up sharply from 1991's 63 cents. Revenues are expected to rise to $3.8 billion this year and to $4.1 billion in 1993 from last year's $3.6 billion.
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