Silgan Holdings Rides On Dispensing Systems Acquisition

On Dec 26, we issued an updated research report on Silgan Holdings Inc. (NASDAQ:SLGN) . The company’s performance will be driven by the Dispensing Systems acquisition and risein capital expenditures. A lower tax rate also remains a tailwind.

Let’s illustrate these factors in detail.

Dispensing Systems Acquisition Benefits Silgan Holdings

Silgan Holdings acquired the specialty closures and dispensing systems operations of WestRock Company (NYSE:WRK) in 2017, now operating under the name Silgan Dispensing Systems (SDS). The company’s Closures segment will continue to benefit from the Dispensing Systems acquisition, including synergies, and continued benefits from manufacturing efficiencies and higher unit volumes.

Rise in Capital Expenditures to Fuel Growth

For 2018, Silgan Holdings expects capital expenditures of $200 million, up from $175 million reported in the prior year. Notably, capital expenditures in 2018 will be utilized for new facilities in Fort Smith, AR, and Allentown, PA.

Lower Tax Rates to Aid Results

Silgan Holdings expects the effective tax rate for 2018 to be 24%, reflecting a substantial improvement from 33.8% in 2017, excluding certain effective tax-rate adjustments. The lower effective tax rate for 2018 reflects the impact of the U.S. Tax Cuts and Jobs Act of 2017. Silgan Holdings, which had been operating with comparative tax rate disadvantages to many of its competitors, will benefit substantially. This tax reform is expected to reduce cash obligations for existing net deferred tax liabilities and enable greater flexibility to utilize global cash to invest in optimal locations.

Share Price Performance

Over the past year, shares of Silgan Holdings have dropped 21% compared with the industry’s loss of around 7%.

Zacks Rank & Other Stocks to Consider

Silgan Holdings currently flaunts a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the same sector are W.W. Grainger, Inc. (NYSE:GWW) and CECO Environmental Corp. (NASDAQ:CECE) . Both stocks carry a Zacks Rank #2 (Buy).

Grainger has a long-term earnings growth rate of 12.4%. The stock has gained around 17% in a year’s time.

CECO has a long-term earnings growth rate of 15%. Its shares have jumped29% in the past year.

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