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Silgan (SLGN) Up 5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Silgan Holdings (SLGN - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Silgan due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Silgan Earnings and Sales Beat Estimates in Q2

Silgan reported second-quarter 2021 adjusted earnings of 85 cents per share, beating the Zacks Consensus Estimate of 83 cents. The bottom line remained flat year over year and was at the higher range of the company’s guidance of 75-85 cents. Strong recovery in the beverage, beauty and fragrance markets, the pass through of higher raw material costs and favorable foreign currency translation led to the encouraging results.

Including one-time items, earnings for the manufacturer of sustainable rigid packaging solutions for consumer goods came in at record 85 cents per share compared with 70 cents reported in the prior-year quarter.

Total revenues improved 15% year over year to $1,349 million on higher sales across its business segments. Further, the top line surpassed the Zacks Consensus Estimate of $1,302 million.

Cost and Margins

During second-quarter 2021, cost of goods sold climbed 17% to $1,113.8 million from the prior-year quarter. Gross profit improved 5% to $235 million. Gross margin came in at 17% compared with the prior-year quarter’s 19%.
Selling, general and administrative expenses declined 6.3% year over year to $94.3 million during the June quarter. Operating income moved up 17% to $153 million. Operating margin came in at 11% in the reported quarter, stable year over year.

Segment Performance

Revenues in the Dispensing and Specialty Closures segment were up 33% year over year to $546 million. The segment’s operating income increased 26% to $74 million.

The Metal Containers segment’s revenues increased 5% year over year to $625 million. Operating income for the segment amounted to $59 million compared with the prior-year quarter’s $72 million.

In the Custom Containers segment, revenues came in at $178 million compared with the year-ago quarter’s $169 million. The segment reported an operating profit of $27 million, reflecting an improvement of 18%.

Financial Updates

The company had cash and cash equivalents of $165 million at the end of second-quarter 2021 compared with $191 million at the end of the prior-year quarter. The company utilized around $209 million cash in operating activities during the six months period ended as of Jun 30, 2021 compared with $64 million in the prior-year comparable period.

2021 Outlook

Silgan continues to expect 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.

Silgan anticipates adjusted earnings per share to lie between 95 cents and $1.10 for third-quarter 2021. The guidance assumes continued strong product demand in key markets and a robust harvest, which will be partly offset by higher raw material costs and labor supply-related challenges. The company reported record earnings per share of $1.04 in third-quarter 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Silgan has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Silgan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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