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Silgan (SLGN) Gains From Operational Efficiency Amid Low Volume
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Silgan Holdings Inc. (SLGN - Free Report) has been gaining from its strong operational performance, which has helped it counter the impacts of elevated input costs, low volumes and unfavorable impacts of currency translations. The company is also benefiting from its capital allocation model and recent acquisitions.
Shares of the company have gained 0.2% in the past year compared with the industry’s growth of 2.3%.
Image Source: Zacks Investment Research
Focus on Capital Allocation to Aid Growth
Silgan has been gaining from a disciplined capital allocation model. It delivered a 10-year compounded annual growth rate for adjusted earnings per share of 12% in 2022.
The company projects a free cash flow of $375 million for 2023, whereas it reported $368.2 million in 2022. It expects strong operating performances and improvements in working capital to drive the free cash flow.
Solid Metal Containers Segment to Boost Margin
Higher average selling prices due to the pass-through of higher raw material and other manufacturing costs are helping the Metal Containers segment’s performance. The segment’s revenues reached a record high in 2022.
The segment will benefit from a strong operating performance, benefits of its inventory management program and higher average selling prices.
Acquisition Strategy Bodes Well
In February 2020, Silgan Holdings acquired Cobra Plastics, which expanded the product offering of its global closures franchise into a variety of new markets and applications. In June 2020, Silgan acquired Albea’s dispensing business, strengthening 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 2022, it acquired Easytech, a manufacturer and seller of easy-open and sanitary metal ends used with metal containers primarily for food applications in Europe. This buyout will enable Silgan to efficiently utilize its existing capacity for metal ends, reduce capital investment and accelerate the company’s cost-reduction program.
These buyouts will help the company generate attractive cash returns in the near term. Silgan is focused on deploying capital to expand its business and reduce operating costs, while increasing shareholders’ return.
Low Volume, High Costs Act as Woes
In the second quarter of 2023, lower volumes and mix, and higher costs impacted the company’s performance. Sales of all the segments are likely to be affected by unfavorable currency translation in the upcoming quarters.
Moreover, the Custom Containers segment is expected to continue to face lower volumes for home, personal care, and lawn and garden products.
Backed by these headwinds and the lower-than-expected second-quarter performance, Silgan expects 2023 adjusted earnings per share (EPS) between $3.40 and $3.60, declining from the previously stated $3.95-$4.15. For third-quarter 2023, Silgan anticipates an adjusted EPS of $1.10-$1.20. The company reported earnings of $1.28 per share in third-quarter 2022.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for the company’s 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN rallied 68.8% in the last year.
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Silgan (SLGN) Gains From Operational Efficiency Amid Low Volume
Silgan Holdings Inc. (SLGN - Free Report) has been gaining from its strong operational performance, which has helped it counter the impacts of elevated input costs, low volumes and unfavorable impacts of currency translations. The company is also benefiting from its capital allocation model and recent acquisitions.
Shares of the company have gained 0.2% in the past year compared with the industry’s growth of 2.3%.
Image Source: Zacks Investment Research
Focus on Capital Allocation to Aid Growth
Silgan has been gaining from a disciplined capital allocation model. It delivered a 10-year compounded annual growth rate for adjusted earnings per share of 12% in 2022.
The company projects a free cash flow of $375 million for 2023, whereas it reported $368.2 million in 2022. It expects strong operating performances and improvements in working capital to drive the free cash flow.
Solid Metal Containers Segment to Boost Margin
Higher average selling prices due to the pass-through of higher raw material and other manufacturing costs are helping the Metal Containers segment’s performance. The segment’s revenues reached a record high in 2022.
The segment will benefit from a strong operating performance, benefits of its inventory management program and higher average selling prices.
Acquisition Strategy Bodes Well
In February 2020, Silgan Holdings acquired Cobra Plastics, which expanded the product offering of its global closures franchise into a variety of new markets and applications. In June 2020, Silgan acquired Albea’s dispensing business, strengthening 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 2022, it acquired Easytech, a manufacturer and seller of easy-open and sanitary metal ends used with metal containers primarily for food applications in Europe. This buyout will enable Silgan to efficiently utilize its existing capacity for metal ends, reduce capital investment and accelerate the company’s cost-reduction program.
These buyouts will help the company generate attractive cash returns in the near term. Silgan is focused on deploying capital to expand its business and reduce operating costs, while increasing shareholders’ return.
Low Volume, High Costs Act as Woes
In the second quarter of 2023, lower volumes and mix, and higher costs impacted the company’s performance. Sales of all the segments are likely to be affected by unfavorable currency translation in the upcoming quarters.
Moreover, the Custom Containers segment is expected to continue to face lower volumes for home, personal care, and lawn and garden products.
Backed by these headwinds and the lower-than-expected second-quarter performance, Silgan expects 2023 adjusted earnings per share (EPS) between $3.40 and $3.60, declining from the previously stated $3.95-$4.15. For third-quarter 2023, Silgan anticipates an adjusted EPS of $1.10-$1.20. The company reported earnings of $1.28 per share in third-quarter 2022.
Zacks Rank and Stocks to Consider
Silgan currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Caterpillar Inc. (CAT - Free Report) , Astec Industries, Inc. (ASTE - Free Report) and Eaton Corporation plc. (ETN - Free Report) . CAT and ASTE sport a Zacks Rank #1 (Strong Buy), and ETN has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for the company’s 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN rallied 68.8% in the last year.