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Here's Why You Should Hold Silgan (SLGN) in Your Portfolio
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Silgan Holdings Inc. (SLGN - Free Report) has been benefiting from solid demand and a disciplined capital allocation model amid input cost and supply-chain headwinds. The company’s strong operational performance is also driving margins.
Silgan currently carries a Zacks Rank #3 (Hold).
Let’s delve deeper and analyze the factors that make this stock worth holding at present.
Solid Q1 Results: Silgan reported first-quarter 2023 adjusted earnings of 78 cents per share, which came in line with the Zacks Consensus Estimate as well as the year-ago quarter’s adjusted figure. Quarterly earnings also came within the guidance of 75-85 cents.
Upbeat FY23 Guidance: Silgan expects adjusted earnings per share (EPS) of $3.95-$4.15 for 2023. The mid-point of the range indicates year-over-year growth of 2%.
Positive Earnings Surprise History: SLGN has an average trailing four-quarter earnings surprise of 5.1%.
Healthy Growth Projections: The Zacks Consensus Estimate for Silgan’s fiscal 2023 earnings is currently pegged at $4.02, indicating a 1% increase year over year.
Price Performance: Shares of Silgan have gained 11.1% in the past year against the industry’s fall of 18%.
Image Source: Zacks Investment Research
Growth Drivers in Place: Silgan has been gaining from a robust demand, disciplined capital allocation model and strong operational performance. It has delivered a 10-year compounded annual growth rate for adjusted EPS of 12% in 2022. Silgan expects adjusted EPS between $3.95 and $4.15. The upbeat guidance indicates a strong contribution 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.
Silgan projects free cash flow to be around $425 million in 2023 compared with $368.2 million in 2022. The company expects to benefit from strong operating performance and improvements in working capital to drive the free cash flow. The company anticipates organic volume growth in its Dispensing and Specialty Closures sector in the second quarter of 2023, driven by improved demand across major product categories and ongoing volume growth in the Metal Containers segment.
The Dispensing and Specialty Closures segment has been benefiting from sustained strong volumes for dispensing products. The acquisitions of Gateway and Unicep in September 2021 also contributed to the segment’s performance. In 2022, the segment’s operating income reached a record high.
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, including the advantage of an inventory management program and higher average selling prices due to the pass-through of inflationary costs.
Near-Term Concerns
Silgan’s high debt levels and the consequent higher interest expenses remain concerning. The company’s total debt-to-total-capital ratio is as high as 0.70 at the end of first-quarter 2023, up from 0.66 at the end of fourth-quarter 2022. The company is, however, taking proactive measures to strengthen its balance sheet amid the ongoing uncertainty. Silgan anticipates higher interest expenses primarily due to rising weighted average outstanding borrowings as a result of the acquisitions completed and higher weighted average interest rates.
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 face lower volumes for home, personal care and lawn and garden products.
The company has been facing supply-chain challenges that are likely to impact its production and hamper margins in the upcoming quarter. Moreover, the ongoing customer and retail inventory destocking due to the ongoing inflationary pressure remains concerning for Silgan.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Shares of WOR have gained 33.5% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. Shares of MTW have rallied 29.1% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15. The consensus estimate for 2023 earnings has risen 8% in the past 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. Shares of ATR have gained 13.4% in the last year.
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Here's Why You Should Hold Silgan (SLGN) in Your Portfolio
Silgan Holdings Inc. (SLGN - Free Report) has been benefiting from solid demand and a disciplined capital allocation model amid input cost and supply-chain headwinds. The company’s strong operational performance is also driving margins.
Silgan currently carries a Zacks Rank #3 (Hold).
Let’s delve deeper and analyze the factors that make this stock worth holding at present.
Solid Q1 Results: Silgan reported first-quarter 2023 adjusted earnings of 78 cents per share, which came in line with the Zacks Consensus Estimate as well as the year-ago quarter’s adjusted figure. Quarterly earnings also came within the guidance of 75-85 cents.
Upbeat FY23 Guidance: Silgan expects adjusted earnings per share (EPS) of $3.95-$4.15 for 2023. The mid-point of the range indicates year-over-year growth of 2%.
Positive Earnings Surprise History: SLGN has an average trailing four-quarter earnings surprise of 5.1%.
Healthy Growth Projections: The Zacks Consensus Estimate for Silgan’s fiscal 2023 earnings is currently pegged at $4.02, indicating a 1% increase year over year.
Price Performance: Shares of Silgan have gained 11.1% in the past year against the industry’s fall of 18%.
Image Source: Zacks Investment Research
Growth Drivers in Place: Silgan has been gaining from a robust demand, disciplined capital allocation model and strong operational performance. It has delivered a 10-year compounded annual growth rate for adjusted EPS of 12% in 2022. Silgan expects adjusted EPS between $3.95 and $4.15. The upbeat guidance indicates a strong contribution 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.
Silgan projects free cash flow to be around $425 million in 2023 compared with $368.2 million in 2022. The company expects to benefit from strong operating performance and improvements in working capital to drive the free cash flow. The company anticipates organic volume growth in its Dispensing and Specialty Closures sector in the second quarter of 2023, driven by improved demand across major product categories and ongoing volume growth in the Metal Containers segment.
The Dispensing and Specialty Closures segment has been benefiting from sustained strong volumes for dispensing products. The acquisitions of Gateway and Unicep in September 2021 also contributed to the segment’s performance. In 2022, the segment’s operating income reached a record high.
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, including the advantage of an inventory management program and higher average selling prices due to the pass-through of inflationary costs.
Near-Term Concerns
Silgan’s high debt levels and the consequent higher interest expenses remain concerning. The company’s total debt-to-total-capital ratio is as high as 0.70 at the end of first-quarter 2023, up from 0.66 at the end of fourth-quarter 2022. The company is, however, taking proactive measures to strengthen its balance sheet amid the ongoing uncertainty. Silgan anticipates higher interest expenses primarily due to rising weighted average outstanding borrowings as a result of the acquisitions completed and higher weighted average interest rates.
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 face lower volumes for home, personal care and lawn and garden products.
The company has been facing supply-chain challenges that are likely to impact its production and hamper margins in the upcoming quarter. Moreover, the ongoing customer and retail inventory destocking due to the ongoing inflationary pressure remains concerning for Silgan.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and AptarGroup, Inc. (ATR - Free Report) . Currently, WOR and MTW flaunt a Zacks Rank #1 (Strong Buy), while ATR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Shares of WOR have gained 33.5% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. Shares of MTW have rallied 29.1% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15. The consensus estimate for 2023 earnings has risen 8% in the past 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. Shares of ATR have gained 13.4% in the last year.