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Why Is Silgan (SLGN) Up 4.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Silgan Holdings (SLGN). Shares have added about 4.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Silgan Beats Q3 Earnings Estimates, Lowers 2023 View

Silgan reported adjusted earnings of $1.16 per share in third-quarter 2023, which surpassed the Zacks Consensus Estimate of adjusted earnings of $1.14 per share. The bottom line declined 9% year over year but came within the company’s guidance of $1.10-$1.20 per share.

Including one-time items, earnings were $1.02 per share compared with $1.25 per share reported in the prior-year quarter.

Total revenues decreased 8.5% year over year to $1,803 million from the prior-year quarter’s $1,970.4 million. The top line missed the Zacks Consensus Estimate of $1,957 million.

Costs and Margins

In third-quarter 2023, the cost of goods sold decreased 8.7% year over year to $1,517 million. The gross profit decreased 7.1% to $286 million. The gross margin was 15.9% compared with the prior-year quarter’s 15.6%.

Selling, general and administrative expenses were $84 million in the reported quarter compared with the year-ago quarter’s $97 million. The company reported an operating income of $194 million in the quarter compared with $219 million in the prior-year quarter.

Adjusted operating profit was $214 million in the third quarter of 2023, 4% lower than $223 million in the prior-year quarter. The adjusted operating margin was 11.9% in the reported quarter compared with the prior-year quarter’s 11.3%.

Segmental Performances

Revenues in the Dispensing and Specialty Closures segment were down 3% year over year to $559 million in the third quarter. The figure lagged the Zacks Consensus Estimate of $569 million due to a lower volume and mix. Due to the persistent impacts of inflation on consumers, mid-single-digit increases in higher-value dispensing products were offset by double-digit decreases in higher-volume closures for the international food and beverage markets.

The operating income for the segment was $78 million in the third quarter of 2023 compared with $79.2 million in third-quarter 2022. The figure lagged the Zacks Consensus Estimate of $99 million. The segment’s adjusted operating income was $93.8 million compared with $88.4 million in the prior-year period.

The Metal Containers segment’s revenues in the quarter declined 10% year over year to $1,095 million due to lower volumes. However, revenues in the quarter surpassed the Zacks Consensus Estimate of $764 million.

The segment’s operating income in the quarter under review was $110 million, down 9% from the prior-year quarter. However, the figure surpassed the consensus estimate of $44 million. Adjusted operating income for the segment amounted to $113.5 million, down 3% from the prior-year quarter.

In the Custom Containers segment, revenues were $149 million compared with the year-ago quarter’s $183 million. The figure was higher than the Zacks Consensus Estimate of $143 million. Operating income slumped 56% year over year to $10.7 million and missed the consensus estimate of $14 million.

The segment reported an adjusted operating income of $11.8 million, down from the previous year’s $22.8 million.

2023 Outlook

Silgan expects 2023 adjusted earnings per share (EPS) between $3.30 and $3.40, declining from the previously mentioned $3.40-$3.60 due to expected lower volumes and higher interest expenses in the fourth quarter of 2023.
For fourth-quarter 2023, SLGN anticipates adjusted EPS in the range of 55-65 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -20.27% due to these changes.

VGM Scores

At this time, Silgan has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Silgan has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Silgan is part of the Zacks Containers - Metal and Glass industry. Over the past month, Crown Holdings (CCK), a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended September 2023 more than a month ago.

Crown reported revenues of $3.07 billion in the last reported quarter, representing a year-over-year change of -5.8%. EPS of $1.73 for the same period compares with $1.46 a year ago.

For the current quarter, Crown is expected to post earnings of $1.46 per share, indicating a change of +24.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Crown. Also, the stock has a VGM Score of B.

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