1 Stock to Watch & 1 to Avoid in a Challenging Glass Products Industry

Industry Overview - The Zacks Glass Products industry is currently facing challenges such as weak demand, rising costs, and labor shortages, which dampen its near-term outlook [1][4] - Despite these challenges, the long-term potential of glass is supported by its recyclability and sustainability, particularly in packaging and construction [1][5] Major Trends - Weak demand in the construction and packaging sectors is attributed to elevated interest rates and persistent inflation, leading to reduced customer spending [4] - The industry is experiencing rising costs related to transportation, chemicals, and fuel, alongside labor shortages that increase operational costs [4] - Customer awareness regarding environmental impact is driving demand for glass packaging, with over 80% of recycled bottles being reused to create new bottles [5] - The global market value for glass containers and bottles is projected to grow from $55.5 billion in 2022 to $88.3 billion by 2032 [5] Technological Innovations - The introduction of smart glass products is revolutionizing the industry, enhancing energy efficiency and comfort in buildings by minimizing glare and heat while maximizing natural light [7] Company Performance - Apogee Enterprises (APOG) has effectively navigated industry headwinds, achieving improved margins and earnings through cost reductions and strategic pricing, positioning it for continued growth [2][15] - O-I Glass (OI) is struggling with declining earnings due to weak demand and production cutbacks, leading to a cautious outlook for investors [2][20] Financial Metrics - The Glass Products industry is currently trading at a trailing 12-month EV/EBITDA ratio of 4.35X, significantly lower than the S&P 500's 18.95X and the Industrial Products sector's 17.57X [12] - Over the past year, the industry has underperformed the S&P 500 and the Industrial Products sector, with a collective loss of 4.3% compared to the sector's 17% growth and the S&P 500's 29.2% increase [10] Company-Specific Insights - Apogee's Project Fortify is expected to deliver annualized cost savings of $13-$14 million, and its recent acquisition of UW Solutions is projected to contribute over $100 million in net sales by fiscal 2026 [15][16] - O-I Glass has seen a decline in volumes and anticipates a further decline in earnings, with a lowered expectation of 70-80 cents per share for 2024, reflecting a year-over-year plunge of 76% [20][21]