Silgan Holdings’ (SLGN) Q2 Earnings In Line, Revenues Lag

Silgan Holdings Inc. SLGN reported record second-quarter 2018 adjusted earnings of 52 cents per share, which surged 49% from the year-ago quarter. Earnings came in line with the Zacks Consensus Estimate and came at the mid-point of management’s guidance of 50-54 cents.

Including one-time items, the company’s earnings per share came in at 50 cents compared to 25 cents recorded in the prior-year quarter.

Total revenues increased 3.7% year over year to $1,059 million. This can be attributed to higher net sales in the closures and plastic container businesses, partially offset by lower net sales in the metal container business. However, the revenue figure missed the Zacks Consensus Estimate of $1,070 million.

Cost and Margins

Cost of goods sold went up 2.6% to $886 million from $863 million in the year-ago quarter. Gross profit rose 9% year over year to $173 million. Gross margin expanded 50 basis points (bps) year over year to 16%.

Selling, general and administrative expenses slipped 11.7% year over year to $78 million. Adjusted operating income went up 36% year over year to $95 million. Operating margin advanced 200 bps year over year to 8.9%.

Segment Performance

Revenues in the Metal Containers segment edged down 0.9%, year over year, to $525 million. The segment’s adjusted operating income decreased 6% year over year to $48.5 million.

The Closures segment’s revenues increased 8.5% year over year to $379 million. Adjusted operating income improved 39.9% year over year to $47.7 million.

At the Plastic Containers segment, revenues climbed 8.7% year over year to $155 million. The segment reported an adjusted profit of $13.4 million, up from $7.2 million witnessed in the prior-year quarter.

Financial Updates

Silgan reported cash and cash equivalents of $181 million at the end of the quarter under review, up from $54 million witnessed at the end of 2017. The company used $93 million of cash in operating activities during the six-month period ended Jun 30, 2018, compared with cash usage of $139 million reported in the comparable period last year.

Guidance

For 2018, Silgan reaffirmed its adjusted earnings per share guidance of $2.03-$2.13. The mid-point of the range depicts year-over-year growth of 26%. The company expects improvement in sales and operating across all its three segments.

For third-quarter 2018, the company initiated an outlook of 74-78 cents for adjusted earnings per share, reflecting 15% increase at the mid-point.

Share Price Performance

Over the past year, Silgan Holdings has outperformed the industry it belongs to. The stock dipped 9.7%, narrower than the 10.8% decline witnessed by the industry.

Zacks Rank & Key Picks

Silgan Holdings currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same industry include Actuant Corporation ATU, Chart Industries, Inc. GTLS and W.W. Grainger, Inc. GWW. All three stocks sport a Zacks Rank #1 (Strong buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Actuant has a long-term earnings growth rate of 15.6%. The stock has gained around 15% in a year’s time.

Chart Industries has a long-term earnings growth rate of 26.9%. The company’s shares have appreciated 123% over the past year.

Grainger has a long-term earnings growth rate of 12.5%. Its shares have rallied 102% in the past year.

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