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Silgan (SLGN) Q2 Earnings & Revenues Top Estimates, View Up

Silgan Holdings Inc. SLGN reported second-quarter 2020 adjusted earnings of 85 cents per share, handily beating the Zacks Consensus Estimate of 63 cents. Further, the figure jumped 54.5% year over year. Solid demand growth across its food, health and hygiene products contributed to the quarterly results.

Including one-time items, the company’s earnings per share came in at 70 cents compared with the prior-year quarter’s 28 cents.

Total revenues increased 7.6% year over year to $1,176.5 million on higher sales across its business segments. The top-line figure also surpassed the Zacks Consensus Estimate of $1,116 million.

Cost and Margins

During the June-end quarter, cost of goods sold climbed 4.6% to $952.4 million from the prior year’s $909.7 million. Gross profit improved 21.7% year over year to $224.1 million. Gross margin came in at 19% compared with the year-ago quarter’s 17%.

Selling, general and administrative expenses went up 25.6% year over year to $100.6 million during the second quarter. Adjusted operating income was up 12% year over year to $120.6 million. Operating margin was 10.3% in the reported quarter compared with the 9.8% witnessed in the prior-year period.

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

Segment Performance

Revenues in the Metal Containers segment was up 3.8% year over year to $597.2 million. The segment’s adjusted operating income increased 37.8% year over year to $73 million.

The Closures segment’s revenues jumped 13% year over year to $410.5 million. Adjusted operating income for the segment came in at $62.8 million compared with the year-earlier quarter’s $47.1 million.

In the Plastic Containers segment, revenues improved to $168.8 million from the $154.2 million reported in the prior-year quarter. The segment recorded an adjusted operating profit of $23.1 million, up from the year-ago quarter’s $13.5 million.

Financial Updates

The company had cash and cash equivalents of $191.1 million in the June-end quarter, up from the year-ago quarter’s $111.3 million. Cash utilized in operating activities were $63.7 million in the first half of 2020 compared with the $129.1 million recorded in the first half of 2019.

Outlook

Silgan has raised its adjusted earnings per share (EPS) guidance for the ongoing year on the current demand for its products and strong year-to-date performance. The company now expects adjusted EPS between $2.70 and $2.85 compared with the prior range of $2.30 to $2.50. The mid-point of the guidance indicates 28% year-over-year increase from $2.16 in 2019. The guidance factors in strong demand for food and consumer health and hygiene products as well as acquisition of Albea’s dispensing business. However, this will be somewhat negated by prevalent bleak demand for beauty products and others that are used in public venues.

Silgan has also raised the current-year free cash flow estimate to roughly $330 million from $275 million.

For the third quarter, Silgan now expects adjusted earnings per share in the range of 85 cents to $1.00 compared with the 76 cents recorded in third-quarter 2019.

Share-Price Performance

Over the past year, Silgan’s stock has gained 25.4%, outperforming the industry’s growth of 6.8%.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Lakeland Industries, Inc. LAKE, IIVI Incorporated IIVI and Energous Corporation WATT. While Lakeland Industries and IIVI sport a Zacks Rank #1 (Strong Buy), Energous carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lakeland Industries has a projected earnings growth rate of 418% for fiscal 2020. The company’s shares have appreciated 50.9% in the past three months.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 46% in the past three months.

Energous has an expected earnings growth rate of 44% for 2020. The stock has soared 252.6% over the past three months.

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