It has been about a month since the last earnings report for Silgan Holdings (SLGN - Free Report) . Shares have added about 1.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Silgan Q3 Earnings & Sales In Line with Estimates
Silgan reported third-quarter 2019 adjusted earnings of 76 cents per share, coming in line with the Zacks Consensus Estimate. Further, the figure also matched the year-ago quarter’s earnings.
Including one-time items, the company’s earnings per share came in at 73 cents compared with the prior-year quarter’s 76 cents.
Total revenues improved 1.1% year over year to $1.32 billion, matching the Zacks Consensus Estimate. The top line improved on higher net sales in the metal container businesses, partially offset by a decline in net sales in the closures and plastic container business.
Cost and Margins
In third-quarter 2019, cost of goods sold went up 1% to $1,114 million from $1,103 million a year ago. Gross profit improved 1.7% year over year to $207.6 million. Gross margin came in at 15.7% compared with year-ago quarter’s 15.6%.
Selling, general and administrative expenses increased 3.3% year over year to $76 million during the third quarter. Adjusted operating income inched up 0.8% to $131.6 million from $130.5 million reported in the year-ago quarter. Operating margin was 10.0% in the reported quarter, flat compared with the prior-year quarter.
Revenues in the Metal Containers segment rose 3% year over year to $822 million. The segment’s adjusted operating income declined 3.3% year over year to $84 million.
The Closures segment’s revenues declined 2% year over year to $353 million. Adjusted operating income for the segment was $45 million in the reported quarter, down 5% from the prior-year quarter.
In the Plastic Containers segment, revenues edged down to $146 million from $148 million reported in the prior-year quarter. The segment reported an adjusted profit of $12 million, up from $9 million in the year-ago quarter.
The company had cash and cash equivalents of $117.4 million at the end of the third quarter, down from the year-earlier quarter end’s balance of $171.4 million. The company utilized $2.5 million of cash in operations during the nine-month period ended Sep 30, 2019 compared with $13.2 million in the prior-year comparable period.
Silgan provided adjusted earnings per share guidance of 34-39 cents for fourth-quarter 2019. The guidance includes an unfavorable non-cash pension impact of approximately 3 cents per share. It also reflects an earlier-than-anticipated end to the fruit and vegetable pack in the beginning of October.
Based on year-to-date performance and the impact of the earlier-than-anticipated end to the fruit and vegetable pack, on fourth quarter, Silgan trimmed adjusted earnings per share to the range of $2.12 to $2.17 from the prior $2.10 to $2.20 for the ongoing year. The guidance for 2019 includes an unfavorable non-cash pension impact of approximately 13 cents per share resulting from significant market declines in investment values at the end of 2018 that negatively impacted the assets held in the company’s pension plans.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -8.57% due to these changes.
At this time, Silgan has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Silgan has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.