Silgan Holdings Inc. (SLGN Quick QuoteSLGN - Free Report) is benefiting from the strong demand in beauty, fragrance, food and beverage markets and recent acquisitions. Apart from this, manufacturing improvement efforts and capacity expansions have been driving growth.

Silgan currently has a Zacks Rank #2 (Buy) and a VGM Score of B. 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.

Record Earnings Per Share in Q1: Silgan’s first-quarter 2022 adjusted earnings was 78 cents per share, beating the Zacks Consensus Estimate of 77 cents. The bottom line improved 4% year over year and came in higher than the company’s guidance of 70-80 cents. Revenues of $1,349 million surpassed the consensus mark of $1,442 million and improved 16.5% year over year on higher sales across its segments.

Upbeat Guidance: Silgan expects adjusted earnings per share between $3.90 and $4.05 for 2022, which has been raised from the previously mentioned $3.80-$4.00. The raised guidance suggests year-over-year growth of 17% at the mid-point from last year’s record levels. The upbeat guidance highlights strong contributions from the recent acquisitions, pass-through of raw material and other cost inflation, improved supply chain, labor availability, and ongoing operating efficiencies across each segment.

Positive Growth Expectations: The Zacks Consensus Estimate for the company’s earnings per share for 2022 is currently pegged at $3.95, indicating year-over-year growth of 16.2%. The consensus mark for 2022 earnings stands at $4.22, which suggests a year-over-year improvement of 6.7%.

Positive Earnings Surprise History: Silgan has a trailing four-quarter earnings surprise of 2.7%, on average.

Underpriced: Looking at Silgan’s price-to-earnings ratio, shares are underpriced at the current level, which is attractive for investors. The company has a trailing P/E ratio of 10.9, below the industry average of 14.5.

Growth Drivers in Place

The Dispensing and Specialty Closures segment has been benefiting from sustained strong volumes for the beauty, fragrance, food and beverage markets. In 2022, the segment income for the Dispensing and Specialty Closures segment is expected to be higher year on year due to the inclusion of a full year from the buyouts of Gateway and Unicep, a less volatile resin market, more efficient operating performance, and the ongoing momentum in the beauty and fragrance markets. Volumes for hygiene and cleaning products are expected to resume normal volume levels. The sports drinks business has been performing well and is expected to contribute to growth.

Strong operational performance has helped the Metal Container segment offset unprecedented inflation and ongoing supply chain and labor challenges. The segment’s net sales are expected to increase in 2022 due to the pass-through of significant raw material inflation. Segment income is anticipated to be higher in 2022, courtesy of more efficient operating performance, cost improvements, the pass-through of other cost inflation to customers, and the inclusion of a full year from the acquisition of Easytech, partially offset by lower unit volumes.

The Custom Container segment’s income is expected to benefit from anticipated higher volumes as a result of a return to more normal volume levels for hygiene and cleaning products, and sustained growth in pet food markets and manufacturing efficiencies.

Silgan is focused on deploying capital to expand its business and reduce operating costs while increasing shareholders’ returns. Silgan has been active on the acquisition front over the past few years, which will help the company generate attractive cash returns in the near term. In February 2020, it acquired Cobra Plastics, which expanded the product offering of its global closures franchise into a variety of new markets and applications. The buyout of Albea’s dispensing business in June 2020 strengthened its position in the dispensing markets. In September 2021, Silgan closed the acquisitions of Unicep and Gateway Plastics to expand Dispensing and Specialty Closures. In October, it acquired Easytech, a manufacturer and seller of easy-open and sanitary metal end used with metal containers primarily for food applications in Europe.

Price Performance

Image Source: Zacks Investment Research

Silgan’s shares have gained 7.2% in the past three months against the industry’s decline of 17.1%.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK Quick QuoteGPK - Free Report) , Myers Industries (MYE Quick QuoteMYE - Free Report) and Packaging Corporation of America (PKG Quick QuotePKG - Free Report) .  All of these stocks flaunt a Zacks Rank #1.

Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.

Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 10% in the past three months.

Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.

MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have surged 52% in the past three months.

Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings rose 4.2% in the past 60 days.

PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 7% over the past three months.