Silgan (SLGN) Tops Q1 Earnings, Revenues, Lifts '17 EPS View

Silgan Holdings Inc. (NASDAQ:SLGN) reported first-quarter 2017 adjusted earnings of 62 cents, up around 38% year over year. Earnings surpassed the Zacks Consensus Estimate as well as the management’s guidance range of 48–58 cents.

Including rationalization charges, the company’s earnings per share came in at 42 cents, down from 44 cents recorded in the prior-year quarter.

Total revenue increased 1.6% year over year to $805.4 million, beating the Zacks Consensus Estimate of $794 million. This growth was primarily driven by an increase in net sales in the metal container business.

Cost and Margins

Cost of goods sold increased 9.4% to $680.8 million from $678.8 million in the year-ago quarter. Gross profit rose 3% to $124.6 million. Gross margin expanded 110 basis points (bps) year over year to 15.5%.

Selling, general and administrative expenses went up 20.8% year over year to $66.9 million. Adjusted operating income edged down 1.4% to $57.7 million. Operating margin contracted 20 bps year over year to 7.2%.

Segment Performance

Revenues at the Metal Containers segment climbed 2.8% year over year to $466 million. The segment’s adjusted operating income improved 18.6% to $44.6 million.

The Closures segment’s revenues inched up 0.8% year over year to $197.7 million. Adjusted operating income declined 2.8% to $24 million.

At the Plastic Containers segment, revenues dropped 1.2% year over year to $141.5 million. The segment reported an adjusted profit of $6.9 million, surging significantly from $1.1 million in the prior-year quarter.

Financial Updates

Silgan had cash and cash equivalents of $350.6 million at the end of first-quarter 2017 compared with $24.7 million at the end of 2016. The company recorded cash used for operating activities of $140.9 million in the reported quarter compared with cash usage of $150.8 million recorded in the year-ago quarter.

Last month, Silgan acquired WestRock Company’s (NYSE:WRK) dispensing systems business for $1.025 billion. The buyout will help in boosting the scope and breadth of Silgan’s market leading Closure business.

Guidance

Silgan raised its estimate of adjusted earnings per share guidance for full-year 2017, which excludes transaction related costs attributed to announced acquisitions, rationalization charges and loss from early extinguishment of debt, to the range of $3.20–$3.40 from the previous range of $3.15–$3.35. This estimate includes the favorable impact from the recently acquired Dispensing Systems business, net of related purchase accounting adjustments, partially offset by the impact from higher average interest rates primarily as a result of the issuance of new senior notes in first-quarter 2017.

For the second quarter, the company anticipates earnings per share in the range of 65–75 cents.

Share Price Performance

Over the last one year, Silgan outperformed the Zacks classified Containers-Metal/Glass sub-industry with respect to price performance. The stock gained around 18.2%, while the industry recorded growth of 12.6% over the same time frame.

Zacks Rank & Other Stocks to Consider

Silgan currently carries a Zacks Rank #2 (Buy).

Other stocks worth considering in the same sector are Applied Industrial Technologies, Inc. (NYSE:AIT) and Casella Waste Systems, Inc. (NASDAQ:CWST) . Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies has an average positive earnings surprise of 9.78% for the trailing four quarters. Casella Waste generated an impressive average positive earnings surprise of 165.21% over the past four quarters.

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