Stock Story -
Rigid packaging solutions manufacturer Silgan Holdings (NYSE:SLGN) fell short of analysts' expectations in Q2 CY2024, with revenue down 3.2% year on year to $1.38 billion. It made a non-GAAP profit of $0.88 per share, improving from its profit of $0.83 per share in the same quarter last year.
Is now the time to buy Silgan Holdings? Find out by reading the original article on StockStory, it's free.
Silgan Holdings (SLGN) Q2 CY2024 Highlights:
- Revenue: $1.38 billion vs analyst estimates of $1.43 billion (3.4% miss)
- EPS (non-GAAP): $0.88 vs analyst expectations of $0.88 (in line)
- EPS (non-GAAP) Guidance for Q3 CY2024 is $1.25 at the midpoint, below analyst estimates of $1.27
- Gross Margin (GAAP): 18.5%, up from 17.5% in the same quarter last year
- Free Cash Flow was -$30.11 million compared to -$628.2 million in the previous quarter
- Market Capitalization: $5.20 billion
Established in 1987, Silgan Holdings (NYSE:SLGN) is a supplier of rigid packaging for consumer goods products, specializing in metal containers, closures, and plastic packaging.
Industrial PackagingIndustrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Over the last five years, Silgan Holdings grew its sales at a weak 5.4% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Silgan Holdings's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.9% annually. Silgan Holdings isn't alone in its struggles as the Industrial Packaging industry experienced a cyclical downturn, with many similar businesses seeing lower sales at this time.
This quarter, Silgan Holdings missed Wall Street's estimates and reported a rather uninspiring 3.2% year-on-year revenue decline, generating $1.38 billion of revenue. Looking ahead, Wall Street expects sales to grow 4.7% over the next 12 months, an acceleration from this quarter.
Operating Margin
Silgan Holdings has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 9.8%, higher than the broader industrials sector.
Analyzing the trend in its profitability, Silgan Holdings's annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years. Shareholders will want to see Silgan Holdings grow its margin in the future.
This quarter, Silgan Holdings generated an operating profit margin of 10.3%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Silgan Holdings's EPS grew at a decent 9.3% compounded annual growth rate over the last five years, higher than its 5.4% annualized revenue growth. However, this alone doesn't tell us much about its day-to-day operations because its operating margin didn't expand.
Diving into the nuances of Silgan Holdings's earnings can give us a better understanding of its performance. A five-year view shows that Silgan Holdings has repurchased its stock, shrinking its share count by 4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Silgan Holdings, its two-year annual EPS declines of 4.7% show its recent history was to blame for its underperformance over the last five years. We hope Silgan Holdings can return to earnings growth in the future.
In Q2, Silgan Holdings reported EPS at $0.88, up from $0.83 in the same quarter last year. This print was close to analysts' estimates. Over the next 12 months, Wall Street expects Silgan Holdings to grow its earnings. Analysts are projecting its EPS of $3.35 in the last year to climb by 12.5% to $3.77.
Key Takeaways from Silgan Holdings's Q2 Results We struggled to find many strong positives in these results. Its revenue unfortunately missed. Overall, this was a mediocre quarter for Silgan Holdings. The stock remained flat at $48.74 immediately after reporting.
