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Investing.com -- Wells Fargo downgraded OI-Glass to Equal Weight ahead of second-quarter earnings, citing excess capacity in Europe, weak North American volumes, and lingering tariff risks despite recent profit improvement under new leadership.
The broker said sector results are expected to come in largely in line with conservative expectations, with foreign exchange providing a lift for companies with international exposure.
"With excess capacity in Europe, persistently weak NA vols and tariff risk, we are comfortable moving to the sidelines," analysts at Wells Fargo (NYSE:WFC) said.
Beverage can makers such as Ball (NYSE:BALL), Crown Holdings (NYSE:CCK), and Ardagh Metal Packaging (NYSE:PKG) are seen as likely outperformers, buoyed by strong promotional activity and potentially poised to raise guidance.
However, Wells Fargo warned that consumer "value-seeking behavior,” including trading down to lower-cost goods and buying in bulk—continues to pressure volumes, particularly for companies like Graphic Packaging (NYSE:GPK), which it flagged as at risk for a guidance cut.
The firm raised estimates across several names in the group, driven in part by a weaker U.S. dollar during the quarter.
It expects a more optimistic tone from managements compared with the previous quarter, though still tempered by caution around tariffs and inventory discipline from consumer goods companies and retailers.
Despite O-I outperforming peers year-to-date, Wells Fargo said it prefers to step back given the macro uncertainties and limited near-term catalysts.