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Silgan Downgraded to Strong Sell

Zacks Equity Research

On Oct 26, 2013, Zacks Investment Research downgraded Silgan Holdings Inc. (SLGN) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Silgan witnessed sharp downward price and estimate revisions after reporting disappointing third-quarter 2012 results on Oct 23. The company reported earnings of $1.23 per share in the third-quarter of 2013, which improved 5.1% year over year but were below the company’s guided range of $1.25 to $1.35 per share.

Despite volume growth in metal container business, weather-related headwinds and higher-than-anticipated interest expense affected the earnings. The results also fell short of the Zacks Consensus Estimate of $1.31. The company has delivered negative earnings surprise in the last three quarters.

For 2013, Silgan lowered its expectation for adjusted earnings per share to the band of $2.75 to $2.85 from $3.00 to $3.15. The Zacks Consensus Estimate for 2013 of $2.80 reflects a year-over-year increase of 3.67%.

Even though Silgan will benefit from its successful acquisitions, increasing productivity and cost reduction initiatives, soft demand in Europe, a high debt-to-capitalization ratio and lower volume expectation remain the concerns.

Over the last 7 days, all of the 10 estimates for Silgan were revised downward, pulling down the Zacks Consensus Estimate by 8% to $2.80 per share. For 2014, all of 10 estimates were revised downward over the same timeframe, lowering the Zacks Consensus Estimate by 7% to $3.15 per share.

Other Stocks to Consider

Not all stocks in the industrial products sector are performing as poorly as Silgan. We recommend Rexam plc (REXMY), with a Zacks Rank #1 (Strong Buy), while Mobile Mini, Inc. (MINI) and Packaging Corporation of America (PKG), carrying Zacks Rank #2 (Buy), are also worth considering.

Read the Full Research Report on SLGN
Read the Full Research Report on PKG
Read the Full Research Report on REXMY
Read the Full Research Report on MINI

Zacks Investment Research