On Oct 26, 2013, Zacks Investment Research downgraded Silgan Holdings Inc. (SLGN - Free Report) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Silgan witnessed sharp downward price and estimate revisions after reporting disappointing third-quarter 2012 results on Oct 23. The company reported earnings of $1.23 per share in the third-quarter of 2013, which improved 5.1% year over year but were below the company’s guided range of $1.25 to $1.35 per share.
Despite volume growth in metal container business, weather-related headwinds and higher-than-anticipated interest expense affected the earnings. The results also fell short of the Zacks Consensus Estimate of $1.31. The company has delivered negative earnings surprise in the last three quarters.
For 2013, Silgan lowered its expectation for adjusted earnings per share to the band of $2.75 to $2.85 from $3.00 to $3.15. The Zacks Consensus Estimate for 2013 of $2.80 reflects a year-over-year increase of 3.67%.
Even though Silgan will benefit from its successful acquisitions, increasing productivity and cost reduction initiatives, soft demand in Europe, a high debt-to-capitalization ratio and lower volume expectation remain the concerns.
Over the last 7 days, all of the 10 estimates for Silgan were revised downward, pulling down the Zacks Consensus Estimate by 8% to $2.80 per share. For 2014, all of 10 estimates were revised downward over the same timeframe, lowering the Zacks Consensus Estimate by 7% to $3.15 per share.
Other Stocks to Consider
Not all stocks in the industrial products sector are performing as poorly as Silgan. We recommend Rexam plc , with a Zacks Rank #1 (Strong Buy), while Mobile Mini, Inc. (MINI - Free Report) and Packaging Corporation of America (PKG - Free Report) , carrying Zacks Rank #2 (Buy), are also worth considering.