Consumer goods packaging specialist Silgan Holdings (SLGN -1.33%) posted a solid beat-and-raise report for the second quarter of 2020. Management hopes to turn the coronavirus safer-at-home windfall into a long-lasting win.
Silgan Holdings' second-quarter results by the numbers
|
Metric |
Q2 2020 |
Q2 2019 |
Change |
Analyst consensus |
|---|---|---|---|---|
|
Net sales |
$1.18 billion |
$1.09 billion |
8% |
$1.12 billion |
|
GAAP net income |
$78 million |
$31 million |
152% |
N/A |
|
Adjusted earnings per diluted share |
$0.85 |
$0.55 |
55% |
$0.65 |
Data sources: Silgan Holdings; StreetInsider.com. GAAP = generally accepted accounting principles.
Silgan crushed Wall Street's expectations in the second quarter and proceeded to raise its guidance targets for the rest of the year. Full-year earnings are now expected to land near $2.78 per share, up from approximately $2.40 per share and ahead of analysts' consensus target of $2.45 per share. Free cash flow should total roughly $330 million in 2020, up from an earlier target of $275 million.
The company benefits from several mass-market consumer trends in the COVID-19 era. With fewer restaurant visits and more cooking being done at home, Silgan sells more food containers into the grocery-store channel. People are also doubling down on their personal hygiene and housecleaning efforts, tapping into another collection of large Silgan clients.
What's next for Silgan?
As a reminder, Silgan makes the plastic and metal containers that producers of food and hygiene items fill with things like soup, salad dressing, ketchup, pet foods, beer, and laundry detergent. This company commands more than half of the U.S. market for metal containers and has respectable market shares in plastic containers and closures (caps, dispensers, can tops, and so on). The client list is a veritable Who's Who of American and global consumer brands. It's no surprise to see Silgan doing well at a time when many consumers are stuck at home. This stock lets you invest in American consumer-product sales without picking a winner in any particular subsector.
Management expects strong end-user demand for hygiene and food products throughout 2020, with the caveat that fruit and vegetable harvests can be unpredictable at the best of times. Hiccups in that particular market could shift Silgan's sales from one quarter to the next as food producers adjust their production schedules.
Image source: Getty Images.
On the earnings call, CEO Anthony Allott explained how shifting consumer behavior during the coronavirus crisis may have opened some doors for Silgan's long-term growth ambitions. It's all about exposing consumers to the value of canned foods, Allott said:
"It was always restaurants who were our main competition. We always said ... it's more about people not eating at home. And so this is a fundamental shift to that question, and we'll all see how long that shift goes on. But as long as economies are tough, we think there'll be kind of a sustained level of more at-home consumption, which, of course, Americans do less than really anywhere else in the world."
Silgan's stock rose nearly 8% on Wednesday, lifting share prices to fresh all-time highs.
