Silgan Holdings Hits 52-Week High: What's Driving the Rally?
Shares of Silgan Holdings Inc. SLGN scaled a fresh 52-week high of $33.47 during the Apr 16 trading session, before retracting a bit to close at $33.40. Acquisitions, manufacturing efficiencies and cost-control initiatives have contributed to this rally.
The company has a market cap of $3.57 billion. Over the last three months, its average volume of shares traded has been 712.5M. Silgan has an expected long-term earnings per share growth rate of 6%.
The company outpaced the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 2.21%.
Driving Factors
The company continues to increase its market share, expand and diversify customer base, geographic presence and product lines through acquisitions and internal growth. Since its inception, Silgan has acquired 36 businesses. Aided by this, along with organic growth through the years, Silgan has become a leading manufacturer of metal containers in North America and Europe, with the metal-container segment generating net sales of $2.47 billion in 2019. Its overall share of the metal food-container market in the United States has gone up from 10% in 1987 to slightly more than half of the market in 2019.
Silgan has become a leading global manufacturer of closures for food, beverage, health care, garden, personal care, home and beauty products through acquisitions, with net sales of $1.46 billion in 2019, marking a seven-fold increase since 2003. The company has also fortified its market position in the plastic container business since 1987, with net sales increasing sevenfold to $614.1 million in 2019.
The company continues to maintain a dominant position in these markets backed by its high levels of quality, service and technical support. Its low-cost producer position, strong long-term customer relationships and widespread geographic presence are added positives.
For the current year, Silgan projects adjusted earnings per share at $2.28-$2.38. The mid-point of the range indicates a year-over-year improvement of 8% from 2019. Though sales are anticipated to be lower across all its segments, continued manufacturing efficiencies across all businesses and solid unit volumes in the metal container and closures businesses will result in higher segment income.
The company keeps evaluating cost-reduction opportunities across each of its businesses, including rationalizations of the existing facilities through plant closures and downsizings, which, in turn, will drive margins. Notably, in 2019, Silgan initiated a multi-year footprint optimization plan in the metal container business in the United States to reduce capacity and keep driving cost reductions. Per the plan, the company intends to shut down six metal container manufacturing facilities over a three-year period. As part of this plan, Silgan shut down two metal container manufacturing facilities in fourth-quarter 2019.
Positive Growth Projections
The Zacks Consensus Estimate for earnings is currently pegged at $2.30 for the current year, suggesting year-over-year growth of 6.48%. For 2021, the Zacks Consensus Estimate for earnings is $2.48, indicating year-over-year growth of 7.76%. Further, the company has an estimated long-term earnings growth rate of 6%.
Share Price Performance
Silgan, along with Ball Corporation BLL and Crown Holdings, Inc. CCK, belongs to the Containers - Metal and Glass industry. Silgan’s share price has gained 11.4% in the past year, outperforming the industry’s growth of 10.5%.
Stock to Consider
A better-ranked stock in the Industrial Products space is Sharps Compliance Corp SMED, which sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has an estimated earnings growth rate of 22.5% for 2020. Its shares have gained 75.1% over the past three months.
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