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Inventories Reduction & Inflation to Impact Silgan Holdings

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On Jun 26, we issued an updated research report on Silgan Holdings Inc. SLGN. The packaging company’s results will be affected by the ongoing plan of inventories reduction and increase in debt. Recent tariff on steel and aluminum prices will also thwart its performance.

Let’s discuss the factors in detail.

Inventories Reduction to Impede Profitability

Silgan Holdings’ metal container business experienced a less favorable overhead absorption and moderately lower volumes in the first quarter resulting in lower profitability, due to planned reduction in inventories. The company’s ongoing plan of inventories reduction in 2018 will dampen its performance.

Inflation to Impact Margins

Silgan Holdings’ margin performance will be impacted in 2018 due to material cost inflation. Recent tariff on steel and aluminum prices imposed by the U.S. government will inflate manufacturing costs. The company’s results will also be thwarted by higher resin cost due to the impact of hurricanes.

Rising Debt a Concern

Silgan Holdings expects that interest expense will flare up this year due to higher average outstanding borrowings. This is due to additional borrowings for the Dispensing Systems acquisition and elevated weighted average interest rates resulting from market rate increases on variable rate debt.

Share Price Performance

Silgan Holdings has underperformed its industry with respect to price performance over the past year. The stock has lost around 15% compared to the loss of 14% incurred by the industry during the same time frame.



Zacks Rank & Key Picks

Silgan Holdings currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the same sector include DMC Global Inc. BOOM, Actuant Corporation ATU and Chart Industries, Inc. GTLS. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has a long-term earnings growth rate of 20%. Its shares have appreciated 270%, over the past year.

Actuant has a long-term earnings growth rate of 15.6%. The company’s shares have rallied 23%, in the past year.

Chart Industries has a long-term earnings growth rate of 26.9%. The stock has gained 96% in a year’s time.

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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
 
Actuant Corporation (ATU) : Free Stock Analysis Report
 
Chart Industries, Inc. (GTLS) : Free Stock Analysis Report
 
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