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Silgan Holdings (SLGN) Down 6.2% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Silgan Holdings Inc. (SLGN - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 drivers.

Silgan Q2 Earnings in Line, Sales Lag, 2017 EPS View Updated

Silgan reported second-quarter 2017 adjusted earnings of $0.35, up around 16.7% year over year. Earnings came in line with the Zacks Consensus Estimate.

Including rationalization charges, the company’s earnings per share came in at $0.25, down from $0.27 recorded in the prior-year quarter.

Total revenue increased 1.6% year over year to $1,022 million. However it lagged the Zacks Consensus Estimate of $1,025 million. This year over year growth was primarily driven by acquisition of Dispensing Systems and higher net sales across all of the businesses.

Cost and Margins

Cost of goods sold increased 14.7% to $856.6 million from $746.9 million in the year-ago quarter. Gross profit rose 29.4% to $165.2 million. Gross margin expanded 160 basis points (bps) year over year to 16.2%.

Selling, general and administrative expenses surged 58% year over year to $87 million. Adjusted operating income grew 7.6% year over year to $78.2 million. Operating margin contracted 60 bps year over year to 7.7%.

Segment Performance

Revenues at the Metal Containers segment were $529.7 million compared to $529.6 million in the year ago quarter. The segment’s adjusted operating income improved 9.4% year over year to $54.6 million.

The Closures segment’s revenues increased 69% year over year to $349 million. Adjusted operating income surged 33% year over year to $34 million.

At the Plastic Containers segment, revenues rose 3.2% year over year to $143 million. The segment reported an adjusted profit of $7.2 million, surging significantly from $1.7 million in the prior-year quarter.

Financial Updates

Silgan had cash and cash equivalents of $142 million at the end of second-quarter 2017 compared with $120.5 million in the end of second-quarter 2016. The company recorded cash used for operating activities of $138.8 million during the six-month period ended Jun 30, 2017 compared with cash usage of $162.6 million in the comparable period last year.

Guidance

Silgan updated its estimate of adjusted earnings per share guidance for full-year 2017, which excludes transaction related costs attributed to announced acquisitions, rationalization charges and loss from early extinguishment of debt, to the range of $1.60–$1.70. The midpoint of the guidance range reflects year over year growth of around 20%.

For the third quarter, the company anticipates adjusted earnings per share in the range of $0.64–$0.71.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Silgan Holdings Inc. Price and Consensus

 

Silgan Holdings Inc. Price and Consensus | Silgan Holdings Inc. Quote

VGM Scores

At this time, Silgan Holdings' stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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