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Why Hold Strategy is Apt for Silgan (SLGN) Stock For Now

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Silgan Holdings Inc. (SLGN - Free Report) is benefiting from forecast-topping fourth-quarter 2020 results, robust demand for vital products like food, beverage, consumer health and personal care products. Further, strategic acquisitions and cost-reduction actions are bolstering Silgan’s performance. However, unfavorable impact of the pandemic on few of the company’s products is a concern.

Silgan currently carries a Zacks Rank #3 (Hold). It 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), 2 (Buy) or 3, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has an estimated long-term earnings growth rate of 11.9%.

Earnings & Sales Top Estimates in Q4

Silgan reported fourth-quarter 2020 adjusted earnings of 60 cents per share, beating the Zacks Consensus Estimate of 53 cents. The bottom line also jumped 58% year on year. Total revenues of $1,227 million surpassed the Consensus Mark and increased 17% year over year.

Positive Earnings Surprise History

Silgan has a trailing four-quarter average earnings surprise of 18.48%.

Solid Estimate Revision Activity

The Zacks Consensus Estimate for the company’s current-year earnings per share moved 10.4% north over the past 60 days and is currently pegged at $3.39. This estimate also suggests year-over-year growth of 10.7%.

Price Performance

The stock has gained 42% over the past year, outperforming the industry’s growth of 23.1%.



Upbeat Guidance

Silgan projects adjusted earnings per share for 2021 to lie between $3.30 and $3.45. The mid-point of the range indicates a 10.3% year-over-year improvement. The company projects strong volumes in the current year backed by ongoing solid demand for shelf-stable metal food packaging and health and hygiene products.

For the first quarter, Silgan anticipates adjusted earnings per share to lie between 65 cents and 75 cents, calling for a year-over-year increase of 22.8% at the mid-point.

Other Growth Drivers in Place

Silgan has been witnessing robust volumes across all of its segments owing to the surge in demand for vital products like food, beverage and consumer health and personal care products amid the coronavirus pandemic. The company’s ongoing focus on cost reduction will continue to drive margins. These factors bode well for its performance.

Silgan’s Metal Container, Closures and Plastic Containers segments’ income in 2021 will likely benefit from the current solid demand scenario, manufacturing efficiencies, new business wins and higher pension income. Moreover, inclusion of the dispensing operations of Albéa is estimated to fuel the closures segment’s income.

Last June, Silgan closed the previously-announced acquisition of Albea’s dispensing business. This buyout has strengthened the company’s position in the dispensing markets. Management expects to realize operational cost synergies of $20 million, on an annual run rate basis, within 18 months following the acquisition. This transaction is expected 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. The company also acquired Cobra Plastics, Inc. in a bid to expand the closures franchise into new markets. Moreover, Silgan has initiated several capacity-expansion projects for dispensing triggers and pumps to support customer growth in health and hygiene product offerings.

However, there are few factors that might impede the company’s growth.

Beauty and personal care products, which account for around 25-30% of the company’s sales, are likely to witness bleak demand due to the pandemic-induced shift in consumers’ buying patterns. Moreover, certain products like gallon, food cans for restaurants and sports drinks are likely to witness volume declines in 2021 as these are not made for stay-at-home use. Volumes of fragrance business might be strained in the first half of 2021 as it is heavily retail and travel based.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are Deere & Company (DE - Free Report) , AGCO Corporation (AGCO - Free Report) and Dover Corporation (DOV - Free Report) . While Deere flaunts a Zacks Rank of 1, AGCO Corporation and Dover carry a Zacks Rank #2, at present.

Deere & Company has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have appreciated 133.2%.

AGCO Corporation has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 134.1% in the past year.

Dover has an expected earnings growth rate of 13.7% for 2021. The stock has gained 38.7% in a year’s time.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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