What Moody’s Thinks of Silgan Holdings’ Rating

Silgan Holdings (SLGN) rose 9.1% to close at $59.77 per share during the fourth week of January 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 9.1%, 16.3%, and 16.8%, respectively, on January 27, 2017.

SLGN is trading 10.2% above its 20-day moving average, 15.2% above its 50-day moving average, and 18.3% above its 200-day moving average.

The Vanguard Materials ETF (VAW) invests 0.30% of its holdings in Silgan. The YTD price movement of VAW was 6.3% on January 27.

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

• Ball Corporation (BLL) — $13.5 billion
• Crown Holdings (CCK) — $7.6 billion
• Berry Plastics Group (BERY) — $6.3 billion

In a press release, Moody’s reported, “Moody’s Investors Service, (“Moody’s”) placed Silgan Holdings Inc.’s Ba1 corporate family rating, Ba1-PD probability of default rating, and all other instrument ratings under review for downgrade.”

The release continued, “The review follows Silgan’s announcement on January 23, 2017 that it has entered into a definitive agreement with WestRock Company (Baa2 stable) to acquire its specialty closures and dispensing systems business in an all cash transaction.”

Silgan Holdings reported 3Q16 net sales of ~$1.1 billion, a fall of 5.3% compared to its net sales of $1.2 billion in 3Q15. The company’s gross profit margin and operating margin expanded 60 basis points each in 3Q16 compared to 3Q15.

Its net income and EPS (earnings per share) fell to $69.8 million and $1.15, respectively, in 3Q16, compared to $70.3 million and $1.16, respectively, in 3Q15. It reported adjusted EPS of $1.23 in 3Q16, a fall of 2.4% compared to 3Q15.

Silgan’s cash and cash equivalents fell 6.3%, and its inventories rose 1.6% between 3Q16 and 4Q15.

Silgan Holdings expects its adjusted EPS to be in the range of $2.70–$2.80, excluding rationalization charges, in 2016. It expects its adjusted EPS to be in the range of $0.43–$0.53, excluding rationalization charges, in 4Q16.

For an ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.