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Here's Why You Should Add Silgan (SLGN) to Your Portfolio
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Silgan Holdings Inc. (SLGN - Free Report) is poised to gain from the surge in demand for food, beverage, and consumer health and personal care products amid the coronavirus pandemic. Acquisitions and cost-reduction efforts will also drive the company’s growth.
The leading supplier of rigid packaging for consumer goods products has a market capitalization of $4.2 billion. It has a trailing four-quarter earnings surprise of 12.8%, on average. The company has an estimated long-term earnings growth rate of 5%.
Shares of this Zacks Rank #2 (Buy) company have gained 22.7% so far this year compared with the industry’s growth of 17.9%. The S&P 500 has climbed 8.2% during the same period.
Silgan has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Better-Than-Expected Q2 Results
Silgan Holdings reported second-quarter 2020 adjusted earnings of 85 cents per share, which surpassed the Zacks Consensus Estimate of 63 cents. Further, the figure jumped 54.5% year over year. Total revenues increased 7.6% year over year to $1,176.5 million, surpassing the Zacks Consensus Estimate of $1,116 million.
Pandemic-Induced Demand Bodes Well
Given the surge in demand for vital products like food, beverage, and consumer health and personal care products amid the coronavirus crisis, the company has been witnessing solid volumes across all of its segments. Notably, all of its global production facilities have remained open and each of the businesses are operating at peak productivity levels.
Acquisitions — A Key Growth Strategy
In June, Silgan closed the previously-announced acquisition of Albea’s dispensing business. It is a strategic fit for the closures business. This buyout is likely to strengthen its position in the dispensing markets. The company expects to realize operational cost synergies of $20 million, on an annual run rate basis, within 18 months following the acquisition. This buyout is expected to modestly boost Silgan’s earnings in 2020.
It is also anticipated to become more accretive as synergies are phased in over the next 18 months, and customers’ buying patterns for the beauty and personal care markets return to more normal levels. Silgan Holdings also acquired Cobra Plastics, Inc., in a bid to expand the closures franchise into new markets.
Cost-Reduction Efforts to Sustain Margins
Silgan Holdings continually evaluates cost-reduction opportunities across each of its businesses, including rationalizations of the existing facilities through plant closures and downsizings. It has a disciplined approach to identify opportunities that generate attractive cash returns. In sync with this, the company had announced an expanded footprint-optimization plan in the metal container business. It is expected to reduce capacity by more than 0.5 billion units and continue to drive further cost reductions. Per the plan, the company intends to close six plants, two of which were closed in 2019.
Positive Growth Estimates
The Zacks Consensus Estimate for the company’s 2020 earnings per share is pegged at $2.84, suggesting growth of 31.7% from the prior year. The consensus mark for 2021 earnings stands at $2.91, indicating a year-over-year improvement of 2.46%.
Estimate Revision Trend
Silgan is witnessing positive estimate revision activities for 2020 and 2021. Over the past 60 days, the Zacks Consensus Estimate for 2020 and 2021 earnings has been revised upward by 18% and 14%, respectively.
Other Stocks to Consider
Other top-ranked stocks in the Industrial Products sector include Astec Industries Inc. (ASTE - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec and IIVI sport a Zacks Rank #1, SiteOne carries a Zacks Rank of 2, currently.
Astec has a projected earnings growth rate of 13.8% for 2020. The company’s shares have gained 28% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 26% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 38% in the year so far.
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
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Here's Why You Should Add Silgan (SLGN) to Your Portfolio
Silgan Holdings Inc. (SLGN - Free Report) is poised to gain from the surge in demand for food, beverage, and consumer health and personal care products amid the coronavirus pandemic. Acquisitions and cost-reduction efforts will also drive the company’s growth.
The leading supplier of rigid packaging for consumer goods products has a market capitalization of $4.2 billion. It has a trailing four-quarter earnings surprise of 12.8%, on average. The company has an estimated long-term earnings growth rate of 5%.
Shares of this Zacks Rank #2 (Buy) company have gained 22.7% so far this year compared with the industry’s growth of 17.9%. The S&P 500 has climbed 8.2% during the same period.
Silgan has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Better-Than-Expected Q2 Results
Silgan Holdings reported second-quarter 2020 adjusted earnings of 85 cents per share, which surpassed the Zacks Consensus Estimate of 63 cents. Further, the figure jumped 54.5% year over year. Total revenues increased 7.6% year over year to $1,176.5 million, surpassing the Zacks Consensus Estimate of $1,116 million.
Pandemic-Induced Demand Bodes Well
Given the surge in demand for vital products like food, beverage, and consumer health and personal care products amid the coronavirus crisis, the company has been witnessing solid volumes across all of its segments. Notably, all of its global production facilities have remained open and each of the businesses are operating at peak productivity levels.
Acquisitions — A Key Growth Strategy
In June, Silgan closed the previously-announced acquisition of Albea’s dispensing business. It is a strategic fit for the closures business. This buyout is likely to strengthen its position in the dispensing markets. The company expects to realize operational cost synergies of $20 million, on an annual run rate basis, within 18 months following the acquisition. This buyout is expected to modestly boost Silgan’s earnings in 2020.
It is also anticipated to become more accretive as synergies are phased in over the next 18 months, and customers’ buying patterns for the beauty and personal care markets return to more normal levels. Silgan Holdings also acquired Cobra Plastics, Inc., in a bid to expand the closures franchise into new markets.
Cost-Reduction Efforts to Sustain Margins
Silgan Holdings continually evaluates cost-reduction opportunities across each of its businesses, including rationalizations of the existing facilities through plant closures and downsizings. It has a disciplined approach to identify opportunities that generate attractive cash returns. In sync with this, the company had announced an expanded footprint-optimization plan in the metal container business. It is expected to reduce capacity by more than 0.5 billion units and continue to drive further cost reductions. Per the plan, the company intends to close six plants, two of which were closed in 2019.
Positive Growth Estimates
The Zacks Consensus Estimate for the company’s 2020 earnings per share is pegged at $2.84, suggesting growth of 31.7% from the prior year. The consensus mark for 2021 earnings stands at $2.91, indicating a year-over-year improvement of 2.46%.
Estimate Revision Trend
Silgan is witnessing positive estimate revision activities for 2020 and 2021. Over the past 60 days, the Zacks Consensus Estimate for 2020 and 2021 earnings has been revised upward by 18% and 14%, respectively.
Other Stocks to Consider
Other top-ranked stocks in the Industrial Products sector include Astec Industries Inc. (ASTE - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec and IIVI sport a Zacks Rank #1, SiteOne carries a Zacks Rank of 2, currently.
Astec has a projected earnings growth rate of 13.8% for 2020. The company’s shares have gained 28% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 26% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 38% in the year so far.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
See their latest picks free >>