UPDATE: JP Morgan Color on Owens-Illinois Initiation

J.P. Morgan, which initiated coverage of Owens-Illinois (NYSE: OI), is providing some color on the stock.

“Owens-Illinois' 2Q11 pre-announcement highlights a very tough story for the company over the past two years,” J.P. Morgan writes. “While the stock appears to have low expectations and to be cheap on the surface (EV/EBITDA, P/E), we are concerned that its ongoing operating issues and below-average FCF yield could be inhibitors to getting the stock back on track in the near term. We do see an opportunity for glass fundamentals to improve, as brewers shift some mix back to glass to achieve better price/cost, potentially leading to improved volumes and pricing.

“That said, OI has significant raw material cost challenges of its own, making the story more likely about moving back to even on price/cost than into a position of strength.”

Owens-Illinois closed Friday at $25.56.