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A month has gone by since the last earnings report for Silgan Holdings Inc. SLGN. Shares have lost about 4.8% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is SLGN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Silgan Beats on Q1 Earnings & Sales, Affirms ’18 EPS View
Silgan Holdings reported record first-quarter 2018 adjusted earnings of 42 cents per share, surged 35.5% from the year-ago quarter. Earnings comfortably beat the Zacks Consensus Estimate of 36 cents and also came above management’s guidance of 32-36 cents.
Including one-time items, the company’s earnings per share came in at 41 cents, up from 21 cents recorded in the prior-year quarter.
Total revenues increased 25.7% year over year to $1,012 million, ahead of the Zacks Consensus Estimate of $985 million. This can be attributed to inclusion of the Dispensing Systems operations and higher sales in each segment.
Cost and Margins
Cost of goods sold increased 24% to $852 million from $687 million in the year-ago quarter. Gross profit rose 35.6% to $160 million. Gross margin expanded 110 basis points (bps) year over year to 15.8%.
Selling, general and administrative expenses flared up 11.8% year over year to $76.7 million. Adjusted operating income went up 68% to $83.3 million. Operating margin expanded 220 bps year over year to 8.2%.
Revenues at the Metal Containers segment improved 4% year over year to $486 million. The segment’s adjusted operating income decreased 15.7% year over year to $37.6 million.
The Closures segment’s revenues soared 87% year over year to $370 million. Adjusted operating income improved 101.7% year over year to $48.2 million.
At the Plastic Containers segment, revenues increased 10% year over year to $156 million. The segment reported an adjusted profit of $11.3 million, up from $6.9 million in the prior-year quarter.
Silgan reported cash and cash equivalents of $174.5 million at the end of the first quarter, up from $53.5 million witnessed at the end of 2017. The company used $90 million of cash in operating activities during the quarter compared with cash usage of $141 million in the prior-year period.
For 2018, Silgan reaffirmed its adjusted earnings per share guidance of $2.03-$2.13. The midpoint of the range depicts year-over-year growth of 26%. The company expects improvement in sales and operating across all its three segments.
For second-quarter 2018, the company initiated outlook of 50-54 cents for adjusted earnings per share, reflecting 48.6% increase at the midpoint.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Silgan Holdings Inc. Price and Consensus
Silgan Holdings Inc. Price and Consensus | Silgan Holdings Inc. Quote
At this time, SLGN has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, SLGN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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