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Silgan Holdings (SLGN) Q3 Earnings Miss, Sales Top, View Cut

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Silgan Holdings (SLGN) Q3 Earnings Miss, Sales Top, View Cut

Silgan Holdings' (SLGN) full-year 2018 performance will be supported by improvement in plastic container business and closures business, despite inflation.

Silgan Holdings Inc. SLGN reported record third-quarter 2018 adjusted earnings of 76 cents per share, which improved 15% from the year-ago quarter. Earnings missed the Zacks Consensus Estimate by a penny, while it came at the mid-point of management’s guidance of 74-78 cents.

Including one-time items, the company’s earnings per share came in at 76 cents compared to 65 cents recorded in the prior-year quarter. Silgan Holdings recorded costs attributed to acquisitions of 1 cent in the prior-year quarter, while the reported quarter did not have such adjustment.

Total revenues increased 3% year over year to $1,307 million. This can be attributed to higher net sales across all businesses. The revenue figure also beat the Zacks Consensus Estimate of $1,300 million.

Silgan Holdings Inc. Price, Consensus and EPS Surprise

 

Silgan Holdings Inc. Price, Consensus and EPS Surprise | Silgan Holdings Inc. Quote

Cost and Margins

Cost of goods sold went up 4% to $1,103 million from $1,061 million in the year-ago quarter. Gross profit edged down 0.7% year over year to $204 million. Gross margin also contracted 60 basis points (bps) year over year to 15.6%.

Selling, general and administrative expenses slipped 1.9% year over year to $74 million. Adjusted operating income remained flat year over year at $131 million. Operating margin shrunk 30 bps year over year to 10%.

Segment Performance

Revenues in the Metal Containers segment decreased 3%, year over year, to $798 million. The segment’s adjusted operating income dropped 6% year over year to $87 million.

The Closures segment’s revenues inched up 1% year over year to $361 million. Adjusted operating income improved 4% year over year to $47.4 million.

In the Plastic Containers segment, revenues climbed 8% year over year to $148 million. The segment reported an adjusted profit of $8.6 million, up from $6.6 million witnessed in the prior-year quarter.

Financial Updates

Silgan reported cash and cash equivalents of $171 million at the end of the quarter under review, up from $54 million witnessed at the end of 2017. The company reported cash flow from operations of $13 million during the nine-month period ended Sep 30, 2018, compared with cash usage of $4 million reported in the comparable period last year.

Guidance

For 2018, Silgan slashed its adjusted earnings per share guidance to $2.03-$2.08 from the prior view of $2.03-$2.13. The guidance includes the unfavorable impact from a planned reduction in finished goods inventory in the metal-container business. 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 fourth-quarter 2018, the company initiated an outlook of 34-39 cents for adjusted earnings per share, reflecting 14% increase at the mid-point.

Share Price Performance

Over the past year, Silgan Holdings has underperformed the industry it belongs to. The stock dipped 20%, wider than the 9% 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 Tetra Tech, Inc. TTEK, Tenaris S.A. TS and Mobile Mini, Inc. MINI. While Tetra Tech sports a Zacks Rank #1 (Strong Buy), Tenaris and Mobile Mini carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tetra Tech has a long-term earnings growth rate of 14%. The stock has appreciated around 32% in a year’s time.

Tenaris has a long-term earnings growth rate of 38.3%. The company’s shares have rallied 12% over the past year.

Mobile Mini has a long-term earnings growth rate of 14%. Its shares have gained 18% in the past year.

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