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Bull of the Day: Silgan (SLGN)

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Silgan Holdings Inc. (SLGN - Free Report) is one of the few companies thriving during the global coronavirus pandemic. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year.

Silgan makes sustainable rigid packaging solutions for consumer goods products. It has more than 50% of the market share in metal containers. It also supplies metal and plastic closures and dispensing systems for food, beverage, health care, garden, home, personal care and beauty products.

Additionally it also supplies plastic containers for shelf-stable food and personal care products in North America.

Silgan operates 110 manufacturing facilities in North and South America, Europe and Asia.

Still Closing on Acquisitions Even During the Pandemic

With its customers seeing a surge of business during the pandemic in "essential" goods like soups, canned fruit and vegetables, and hand soap and sanitizer, Silgan has been busy.

On June 1, it closed on its $900 million acquisition of the dispensing business of the Albea Group. Silgan funded it through term and revolving loan borrowings under its senior secured credit facility.

This business makes highly engineered pumps, sprayers and foam dispensing solutions to the major branded consumer goods product companies, primarily in beauty and personal care markets.

It has 10 manufacturing facilities across North America, Europe, South America and Asia.

This business generated sales of about $395 million in 2019.

This acquisition raises Silgan's total manufacturing facilities globally to 110.

It is expected to be modestly accretive to 2020 earnings.

A Record First Quarter of 2020

On Apr 22, Silgan reported its first quarter results and beat the Zacks Consensus Estimate by $0.08. Earnings were $0.57 compared to the consensus of $0.49.

It was the 6th meet or beat in a row.

Silgan's business was declared "essential" and all 100 of its production facilities remained open in Q1.

As consumers rushed to the stores in March to stock up on essential goods, including food and personal care products, Silgan's volumes soared.

In the metal container business, volumes were up 8% in the quarter. Closures jumped 5% while plastic containers surged 6%.

However, selling and administrative costs were higher in the quarter due to a one-time incentive payment made to the plant employees during the crisis, as well as costs associated with already announced acquisitions.

Raised Full Year Estimates

Who is RAISING their earnings estimates for the year during the pandemic?

Silgan is, that's who.

It acknowledges that there remains a lot of uncertainty in their business.

But it raised full year earnings estimates to a range of $2.30 to $2.50, which is an 11.1% increase at the midpoint compared to 2019's $2.16.

The analysts followed with their own bullish earnings revisions, with 6 being revised higher to meet the company's guidance.

The Zacks Consensus Estimate has risen to $2.41 from $2.30 just 60 days ago.

That's earnings growth of 11.6%.

Shares Higher in 2020 But Still Cheap

Silgan shares have surged off their March lows and are now up 9% year-to-date.

But they're still cheap with a forward P/E of just 14.

The company is also shareholder friendly. It has paid a dividend every quarter since 2004. It's currently yielding 1.4%.

Silgan is the only Zacks Rank #1 (Strong Buy) among its competitors. Ball Corp. (BLL - Free Report) and Crown Holdings (CCK - Free Report) are both Zacks #4 (Sell) stocks.

For investors looking for rising earnings guidance at a time when most companies are cutting, or withdrawing it, Silgan is one to keep on your short list.

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