Special Report

America’s Worst Run Companies

7. Owens Illinois
> Industry: Metal and glass containers
> Revenue (last 12 months): $6.9 billion
> 1-year share price change: -23.1%

Owens-Illinois (NYSE: OI) is a leader in glass packaging, including making bottles for beers, sodas, wines, and more. However, the company has been hit by hard times lately. O-I stands firmly in favor of glass packaging, but a lack of diversification is problematic since glass has lost market share to other types of packaging.

Other packing companies have succeeded even as O-I has floundered. As O-I’s earnings have fallen 24% in the last three years — on a trailing 12 month basis — metal packaging leader Ball Corporation’s earnings have increased by 32% in that time, helped by a focus on containing costs. Barclay’s noted in a recent downgrade that consumers no longer have strong preferences for glass bottles over cans — at least not enough to justify the additional price.

Company investors may want also to question why the company has not expanded into metal. Privately held Irish company Ardagh Packaging Holdings Limited demonstrates that that packaging companies can maintain operations in both metal and glass. Metal and glass each generated roughly half of the company’s 4 billion euro revenue last year.

O-I has done a consistently poor job of managing investor expectations. In October, Morningstar noted the company had a track record of setting overly optimistic forecasts that it fails to meet. The company lowered its guidance in October, leading to a selloff. In December, O-I again cut its 2015 outlook, prompting the Barclays downgrade. In a recent letter activist fund Atlantic Investment Management blamed management for inefficiently running the company, while calling CEO Albert Stroucken “quick to assign blame to macro factors when earnings miss the target.”

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8. Freeport-McMoRan
> Industry: Diversified metals and mining
> Revenue (last 12 months): $22.1 billion
> 1-year share price change: -26.6%

Freeport-McMoRan is a global mining company with copper, gold, molybdenum, and oil and gas operations. The company derives much of its operating profits from its North American copper business and from the Grasberg Minerals District in Indonesia, home to some of the world’s largest copper and gold reserves. Like other commodities players, Freeport has been hurt by the drops in copper, gold, and oil prices.

However, company investors have even more reasons to be upset. According to The Wall Street Journal, Freeport is closing in on a more-than $100 million lawsuit settlement related to the acquisitions of two companies in recent years. Shareholders alleged that Freeport’s acquisition of a company called McMoRan Exploration, in which many Freeport executives held a stake, amounted to a bailout. They also alleged that its buyout of Plains Exploration & Production, a minority owner of McMoRan Exploration, was intended to ensure the first deal went through.

Morningstar wrote in October that “the deals constituted a major use of shareholder capital in a manner we believe was inconsistent with shareholder expectations,” citing a 16% drop in stock price the day the deals were first announced.

In recent years, high pay packages for CEO Richard Adkerson have also been a source of criticism from investors. In the last five years, Freeport shares dropped by more than 44%, versus an 81% gain in the S&P 500.

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