What happened
Shares of Silgan Holdings (SLGN -0.13%) were down 13% as of 11:43 a.m. ET Wednesday after the consumer goods packaging company reported its second-quarter earnings results.
Silgan reported solid growth in its dispensing products segment and improving profits in the metal containers segment, but total sales across the business fell by 6% year over year, excluding non-recurring sales in Russia. Investors in morning trading seemed to be reacting to management's outlook for weakening business trends entering the third quarter.
So what
Business trends for Silgan were positive early in the second quarter, but started to weaken later in the period. Its customers are starting to shift away from purchasing new materials as they focus on rightsizing their inventories for the second half of the year. Some companies have reported high inventory levels are impacting their revenue guidance. This is an indication of weaker consumer demand.
Silgan has lowered its full-year sales guidance to account for worsening market conditions. Management will focus on keeping costs under control; the company has a long record of delivering consistent annual profits.
Now what
Management is now calling for full-year adjusted earnings per share to land in the range of $3.40 to $3.60, down from its previous guidance range of $3.95 to $4.15. In 2022, Silgan earned $4.01 per share.
The company has leading positions in metal containers and dispensing and specialty closures, so the stock could become attractive at a lower valuation. Silgan has been a profitable acquirer of businesses in its space for more than 30 years, and management still likes its long-term growth opportunities.
