Silgan Holdings Inc. (SLGN) is a leading supplier of rigid packaging solutions. Its products are commonly used in everyday food consumables, including pet food, fruits, vegetables, and beverages, while its closures are vital components for industries such as beverages, garden care, household products, and personal care items, writes Ben Reynolds, editor of Sure Passive Income.
With operations across North America, Europe, and other international markets, the company has a market cap of $5.8 billion. On Oct. 15, Silgan completed its 838-million-euro acquisition of Netherlands-based Weener Plastics, funded primarily by a 700-million-euro term loan. The deal is expected to generate 20 million euros in synergies within 18 months, boost earnings by 2025, and strengthen Silgan’s presence in personal care and healthcare markets.
On Oct. 30, Silgan posted Q3 results for the period ending Sept. 30. Quarterly revenue dropped 2.8% year-over-year to $1.75 billion. Metal container sales declined 7% to $1.09 billion, despite a 2% volume rise, due to pet food growth offset by weaker fruit and vegetable volumes.
Dispensing and specialty closures rose 1% to $559.1 million, with a 2% volume increase, led by record dispensing volumes but softened by lower closures for hot-fill beverages. Custom containers grew 6% to $158.8 million, driven by a 5% volume increase from new business.
Over the past decade, Silgan has achieved a compound annual growth rate (CAGR) of 8.5% for earnings per share. Demand for its products remains steady, and we expect this trend to continue, supporting long-term growth.
However, we estimate future EPS growth at a more conservative 6%, due to the potential for a slowdown. This could be driven by product oversupply, as seen last year, which may also impact growth. Additionally, share buybacks, which have reduced the share count by 16% over the past decade, should continue to contribute to EPS growth.
Recommended Action: Buy SLGN.
