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Growth & Income

Silgan Holdings Inc. (SLGN - Analyst Report) is one of those companies that you've probably never heard of, yet you use their products all the time. The company manufactures metal and plastic consumer goods packaging products, so that metal can containing your soup, peas, or dog food or that plastic container holding your shampoo could have came from Silgan.

The company has recently seen earnings estimates rise despite an earnings miss in the third quarter. The Zacks Consensus Estimate currently calls for solid 17% EPS growth in 2011.

Silgan has also been generous in raising its dividend. Its payout ratio is still relatively low too, so more dividend hikes could be on the horizon.

Third Quarter Results

Net sales for the third quarter fell 1.4% year-over-year. Softness in both the metal food container and closures segments was partially offset by gains in the plastic container business.

Meanwhile, the gross margin slid from 16.4% to 16.2% of sales due in part to an unfavorable product mix.

Earnings per share came in at 89 cents, 2 cents shy of the Zacks Consensus Estimate.

Outlook

Despite the earnings miss, management reiterated its 2010 guidance of $2.10 to $2.20 per share. The Zacks Consensus Estimate is within this range at $2.18. This represents 4% growth over 2009 EPS. The company reports its results for the fourth quarter and full year 2010 on Tuesday, February 1.

Estimates for 2011 shot higher following the third quarter results, as seen in the Price & Consensus chart:

SLGN: Silgan Holdings

The Zacks Consensus Estimate for 2011 is currently $2.55, equating to 17% growth.

Dividend

The company began paying a dividend in 2004 and has raised it every year since at a compound annual growth rate of 18.7%. It currently yields 1.2%.

Silgan's payout ratio of 21% is relatively low, so more dividend hikes are likely on the way.

Valuation

Shares trade at 13.9x forward earnings, a discount to the industry average of 15.4x. Its price to book ratio of 3.4 is higher than its peers at 1.9 however.

Silgan Holdings has a market cap of $2.7 billion and is headquartered in Stamford, Connecticut. It is a Zacks #2 Rank (Buy) stock.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

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