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A month has gone by since the last earnings report for Silgan Holdings (SLGN). Shares have added about 0.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Silgan due for a pullback? 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 catalysts.
Silgan Holdings Q1 Earnings and Revenues Top Estimates
Silgan Holdings reported first-quarter 2019 adjusted earnings of 46 cents per share, beating the Zacks Consensus Estimate of 43 cents. Further, the figure improved 10% from the year-ago quarter and was also a first-quarter record.
Including one-time items, the company’s earnings per share were 42 cents compared with 41 cents in the prior-year quarter.
Total revenues inched up 1.5% year over year to $1,027 million, surpassing the Zacks Consensus Estimate of $998 million. Higher net sales in the metal and plastic container businesses were partially offset by a decline in net sales in the closures business.
Cost and Margins
In first quarter 2019, cost of goods sold went up 1% to $861 million from $852 million a year ago. Gross profit improved 3.7% year over year to $166 million. Gross margin rose 40 basis points to 16.2% from the prior-year quarter.
Selling, general and administrative expenses increased 1.3% year over year to $78 million during first-quarter 2019. Adjusted operating income increased 6% to $88.3 million from $83.3 million recorded in the year-ago quarter. Operating margin was 8.6% in first-quarter 2019 compared with 8.2% in the year-ago quarter.
Revenues at the Metal Containers segment increased 4.3% year over year to $507 million. The segment’s adjusted operating income improved 4% year over year to $39.1 million.
The Closures segment’s revenues declined 3.8% year over year to $356 million. Adjusted operating income was $45.9 million in the reported quarter, down 5% from the prior-year quarter.
At the Plastic Containers segment, revenues climbed 5% year over year to $163.9 million. The segment reported an adjusted profit of $12.3 million, up from $11.3 million in the prior-year quarter.
The company reported cash and cash equivalents of $141.4 million at the end of first-quarter 2019, up from $72.8 million at the end of 2018. The company utilized $156 million of cash in operations during the first quarter of 2019 compared with $90 million in the prior-year quarter.
Silgan anticipates adjusted earnings per share in the range of $2.10 to $2.20 for 2019, reflecting an increase of 3% from the prior year at the mid-point. The guidance for 2019 includes an unfavorable non-cash pension impact of approximately 13 cents per share resulting from significant market declines in investment values at the end of 2018 that negatively impacted the assets held in the company’s pension plans.
Silgan provided adjusted earnings per share guidance in the range of 51 cents to 56 cents for the second quarter of 2019. This includes an unfavorable non-cash pension impact of approximately 3 cents per share. Compared with earnings per share of 52 cents in the second quarter of 2018, the mid-point of the guidance range reflects year-over year improvement of 3%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 27.39% due to these changes.
At this time, Silgan has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Silgan has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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