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Silgan (SLGN) Q4 Earnings and Revenues Surpass Estimates

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Zacks Equity Research
·5 min read
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Silgan Holdings Inc. SLGN reported fourth-quarter 2020 adjusted earnings of 60 cents per share, beating the Zacks Consensus Estimate of 53 cents. The bottom line also improved 58% year over year and exceeded the company’s adjusted earnings guidance of 47-52 cents. Solid demand from food, consumer health, hygiene and personal care products, and contributions from the recent acquisitions of Cobra Plastics and the dispensing operations of Albéa led to the improved results.

Including one-time items, earnings for the manufacturer of sustainable rigid packaging solutions for consumer goods was 54 cents per share compared with 31 cents reported in the prior-year quarter.

Total revenues improved 17% year over year to $1,227 million on higher sales across its business segments. Further, the top line surpassed the Zacks Consensus Estimate of $1,182 million. The company witnessed solid volume growth of 15% in both metal containers and closures segments, and 8% in plastic containers.

The inclusion of the acquired dispensing operations of Albéa and Cobra Plastics, and continued high demand for food, consumer health, hygiene and personal care products led to improvement in volumes. Gains from higher volumes, more favorable mix of products sold in the closures business and favorable foreign currency translation were partially offset by the pass through of lower raw material costs and a continued shift toward smaller metal packages sold in the metal container business.

Silgan Holdings Inc. Price, Consensus and EPS Surprise

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

Silgan Holdings Inc. price-consensus-eps-surprise-chart | Silgan Holdings Inc. Quote

Cost and Margins

During fourth quarter-2020, cost of goods sold climbed 15% to $1,027 million from the prior-year quarter. Gross profit improved 28% year over year to $200 million. Gross margin came in at 16.3% compared with the year-ago quarter’s 14.9%.

Selling, general and administrative expenses increased 17% year over year to $96 million during the fourth quarter. Adjusted operating income was up 40% year over year to $104 million. Operating margin improved to 8.5% in the reported quarter compared with 7.1% in the prior-year period.

Segment Performance

Revenues in the Metal Containers segment were up 5% year over year to $596 million. The segment’s adjusted operating income increased 15% year over year to $38 million.

The Closures segment’s revenues surged 41% year over year to $470 million. Adjusted operating income for the segment amounted to $60 million compared with the prior-year quarter’s $42 million.

In the Plastic Containers segment, revenues were $161 million compared with the year-ago quarter’s $147 million. The segment reported an adjusted operating profit of $21 million, reflecting an improvement of 75% from the year-ago quarter.

Financial Updates

The company had cash and cash equivalents of $409.5 million at the end of 2020 compared with $204 million at the end of fiscal 2019. The company generated cash flow of around $603 million from operating activities in 2020 compared with the $507 million in the prior year. Free cash flow generated through the year was a record of $383.5 million

2020 Results

Silgan reported adjusted record earnings per share of $3.06 in 2020, up 42% from the prior year’s $2.16. Earnings beat the Zacks Consensus Estimate of $2.98 and came ahead of management’s guidance of adjusted earnings per share between $2.92 and $2.97. Including one-time items, the bottom line came in at $2.77, up 59% from the $1.74 in 2019.

Sales rose 10% year over year to a record $4.92 billion from the prior year’s $4.49 billion driven by higher net sales in all of the businesses. The top-line figure also outpaced the Zacks Consensus Estimate of $4.88 billion.

2021 Outlook

Backed by the ongoing strong demand for shelf-stable metal food packaging and health and hygiene products, the company expects strong volumes in 2021. Silgan projects adjusted earnings per share in 2021 between $3.30 and $3.45. The mid-point of the range indicates a 10.3% year-over-year improvement. The company expects to continue generating significant free cash flow of approximately $380 million in 2021.

Silgan anticipates adjusted earnings per share between 65 cents and 75 cents in first-quarter 2021. Modest volume growth in all businesses is anticipated to be partially offset by the unfavorable impact from the lagged pass through of recently announced resin cost increases. The mid-point of the range reflects a 22.8% increase over adjusted earnings per share of 57 cents in first-quarter 2020.

Price Performance

Silgan’s shares have gained 16.1% in a year’s time, compared with the industry’s rally of 22.5%.

Zacks Rank and Stocks to Consider

Silgan currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industrial products sector are AGCO Corporation AGCO, Alcoa Corp. AA and Crown Holdings, Inc. CCK. While AGCO flaunts a Zacks Rank #1 (Strong Buy), Alcoa and Crown Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an expected earnings growth rate of 15.8% for the current fiscal. The company’s shares have gained around 46% in the past year.

Alcoa has an expected earnings growth rate of 240.5% for the current fiscal. The company’s shares have appreciated around 28.7% in the past year.

Crown Holdings has an expected earnings growth rate of 11.7% for the current fiscal. The company’s shares have advanced around 15% in the past year.

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