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Silgan Announces 2Q16 Results, Rating Is Downgraded

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Price movement 

Silgan Holdings (SLGN) fell by 5.1% to close at $49.58 per share during the fourth week of July 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -5.1%, -0.26%, and -7.1%, respectively, as of July 29. SLGN is trading 4.4% below its 20-day moving average, 2.9% below its 50-day moving average, and 4.1% below its 200-day moving average.

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Related ETF and peers

The Vanguard Materials ETF (VAW) invests 0.30% of its holdings in Silgan. The ETF tracks a very broad market-cap-weighted index of US materials companies. The YTD price movement of VAW was 15.7% on July 29.

The market caps of Silgan’s competitors are as follows:

  • Ball (BLL) — $10.1 billion
  • Crown Holdings (CCK) — $7.4 billion
  • Berry Plastics Group (BERY) — $4.9 billion

Silgan Holdings’ rating

Wells Fargo has downgraded Silgan Holdings’ rating to “market perform” from “outperform.”

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Performance of Silgan Holdings in 2Q16

Silgan Holdings reported 2Q16 net sales of $874.6 million, a fall of 4.3% from the net sales of $914.2 million in 2Q15. Sales of metal containers, closures, and plastic containers fell by 4.4%, 0.29%, and 9.7%, respectively, between 2Q15 and 2Q16. It reported rationalization charges of $5.0 million in 2Q16, compared with $1.0 million in 2Q15. The company’s gross profit margin and income from operations fell by 0.16% and 13.5%, respectively.

Its net income and EPS (earnings per share) fell to $33.3 million and $0.55, respectively, in 2Q16, compared with $42.2 million and $0.70 in 2Q15. It reported adjusted EPS of $0.60 in 2Q16, a fall of 15.5% from 2Q15.

Silgan’s cash and cash equivalents and inventories rose by 20.6% and 28.4%, respectively, between 4Q15 and 2Q16. Its debt-to-equity ratio rose to 4.2x in 2Q16, compared with 4.0x in 4Q15.

Projections

The company has projected adjusted EPS in the range of $2.70 to $2.90, which excludes rationalization charges for fiscal 2016. This guidance reflects a slow start to the European season and low demand from US pack customers. It also expects adjusted EPS in the range of $1.20 to $1.30, which excludes rationalization charges for fiscal 3Q16.

In the next part of this series, we’ll take a look at Fortune Brands Home & Security.

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