For Immediate Release
Chicago, IL – June 8, 2020 – Zacks Equity Research Shares of Silgan Holdings Inc. SLGN as the Bull of the Day, Canada Goose Holdings Inc. GOOS asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Sempra Energy SRE, Fortinet FTNT and Abbvie ABBV.
Here is a synopsis of all five stocks:
Bull of the Day:
Silgan Holdings Inc. is one of the few companies thriving during the global coronavirus pandemic. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year.
Silgan makes sustainable rigid packaging solutions for consumer goods products. It has more than 50% of the market share in metal containers. It also supplies metal and plastic closures and dispensing systems for food, beverage, health care, garden, home, personal care and beauty products.
Additionally it also supplies plastic containers for shelf-stable food and personal care products in North America.
Silgan operates 110 manufacturing facilities in North and South America, Europe and Asia.
Still Closing on Acquisitions Even During the Pandemic
With its customers seeing a surge of business during the pandemic in "essential" goods like soups, canned fruit and vegetables, and hand soap and sanitizer, Silgan has been busy.
On June 1, it closed on its $900 million acquisition of the dispensing business of the Albea Group. Silgan funded it through term and revolving loan borrowings under its senior secured credit facility.
This business makes highly engineered pumps, sprayers and foam dispensing solutions to the major branded consumer goods product companies, primarily in beauty and personal care markets.
It has 10 manufacturing facilities across North America, Europe, South America and Asia.
This business generated sales of about $395 million in 2019.
This acquisition raises Silgan's total manufacturing facilities globally to 110.
It is expected to be modestly accretive to 2020 earnings.
A Record First Quarter of 2020
On Apr 22, Silgan reported its first quarter results and beat the Zacks Consensus Estimate by $0.08. Earnings were $0.57 compared to the consensus of $0.49.
It was the 6th meet or beat in a row.
Silgan's business was declared "essential" and all 100 of its production facilities remained open in Q1.
As consumers rushed to the stores in March to stock up on essential goods, including food and personal care products, Silgan's volumes soared.
In the metal container business, volumes were up 8% in the quarter. Closures jumped 5% while plastic containers surged 6%.
However, selling and administrative costs were higher in the quarter due to a one-time incentive payment made to the plant employees during the crisis, as well as costs associated with already announced acquisitions.
Raised Full Year Estimates
Who is RAISING their earnings estimates for the year during the pandemic?
Silgan is, that's who.
It acknowledges that there remains a lot of uncertainty in their business.
But it raised full year earnings estimates to a range of $2.30 to $2.50, which is an 11.1% increase at the midpoint compared to 2019's $2.16.
The analysts followed with their own bullish earnings revisions, with 6 being revised higher to meet the company's guidance.
The Zacks Consensus Estimate has risen to $2.41 from $2.30 just 60 days ago.
That's earnings growth of 11.6%.
Shares Higher in 2020 But Still Cheap
Silgan shares have surged off their March lows and are now up 9% year-to-date.
But they're still cheap with a forward P/E of just 14.
The company is also shareholder friendly. It has paid a dividend every quarter since 2004. It's currently yielding 1.4%.
Silgan is the only Zacks Rank #1 (Strong Buy) among its competitors.
For investors looking for rising earnings guidance at a time when most companies are cutting, or withdrawing it, Silgan is one to keep on your short list.
Bear of the Day:
Canada Goose Holdings Inc. is getting hit hard by the coronavirus business and travel shutdowns. This Zacks Rank #5 (Strong Sell) is expected to see its earnings decline by the double digits in Fiscal 2021.
Canada Goose is a luxury apparel retailer, best known for its rugged winter jackets. It has retail stores around the world and sells wholesale as well.
Business Being Impacted Globally By the Coronavirus
On June 3, Canada Goose reported fourth quarter and full year fiscal 2020 results.
It met on the Zacks Consensus of a loss of $0.09.
Total revenue for the year rose 15.4% to $958.1 million but was impacted as the coronavirus hit in China and Asia at the beginning of 2020 and then spread to Europe, North America and then the rest of the globe.
Prior to COVID, the political demonstrations in Hong Kong, and a decline in tourism there as well as store shutdowns, also impacted results.
Some of the actions the company has taken this year is voluntary salary reductions of 20% of all Executive Team members, with the CEO continuing to forego his entire salary indefinitely.
Canada Goose has also eliminated large seasonal inventory investments that are typical at this time of the year due to the mandated suspension of down-filled jacket manufacturing.
Warns on the Fiscal First Quarter
The fiscal first quarter ends on June 28, 2020 and Canada Goose warned that it expects a "negligible level" of revenue.
This quarter, historically, is the company's slowest of the year. It represents just 7.4% of all sales.
But through the first 7 weeks of this quarter, 75%, or 15 out of 20 retail stores in the direct-to-consumer channel were temporarily closed.
Even those that were re-opened have taken a hit. In Hong Kong, 2 stores that were open during the quarter have been "severely impacted" by tourism and travel restrictions that remain in effect.
It's Paris store re-opened on May 20, followed by Milan on May 29 and Montreal on June 2.
It will continue to slowly reopen more stores as allowed under the regulatory guidelines.
Full Year Estimates Cut
It's not a surprise, with stores closed and wholesale revenue down due to closures as well, that analysts have cut full year estimates.
2 were cut in the last 30 days pushing the fiscal 2021 Zacks Consensus Estimate down to $0.78. It was at $1.29 just 90 days ago.
That's an earnings decline of 21.2% compared to last year when it made $0.99.
Are Shares a Bargain?
Shares have been hit over the last three years and are still down 30% year-to-date.
But with those estimate cuts, they're not altogether cheap with a forward P/E of 31.7.
The luxury retailers are mostly in the same position. But the shutdowns won't last forever.
Investors interested in the luxury retail companies have to be prepared to be patient.
A "Don't Fight the Fed" Rally: Zacks June Strategy
The following is an excerpt from Zacks Chief Strategist John Blank’s full Jun Market Strategy report To access the full PDF, click here
What’s a stock trader to do?
It’s June. Surely you are mindful about all of this tumult.
Don’t worry too much. The New York and Washington Federal Reserve Banks – formerly the staid banker’s lender of last resort – have now become the 1st default crisis buyer in public fixed income capital markets.
Consider this timeline. In 2007, the Fed’s balance sheet was about $1 Trillion in size:
- Facing an epic housing finance crisis, it grew by $1T in 2009
- Facing a follow-on European debt crisis, it grew by $2T after 2013
- In the last three months of 2020, it grew another $3T
When the 10-year U.S. Treasury offers a paltry 0.80% annual yield, where do stocks go?
To June 5th, the YTD S&P 500 index loss has receded to just -3.7%. On May 5th, that YTD loss was a larger -12.0%. On April 5th, the YTD decline was a whopping -23.0%.
We have now reeled back nearly all of the coronavirus losses. A stock market correction is a drop of -10% or greater. If prices drop -20% or more, this gets called a bear market. What to call this distrusted three-month long stock market rally? That remains a stumbling block.
A “Don’t Fight the Fed” rally may be the most appropriate. But there is more kick to this:
- Over March, the S&P 500 fell -16.3% due entirely to virus shutdowns. Swift Fed action stabilized corporate bond markets.
- In early April, the Federal Fiscal CARES stimulus act passed. Since then, the U.S. Congress got a 2nd supplemental funding bill passed, with more small business loans.
- In early May, international travel shutdowns remained the norm. Some U.S. state governors gingerly lifted their “Stay-at-Home” decrees.
- In early June, a number of European travel shutdowns are ending, and all 50 U.S. states are open for business.
After reaching 30k to 35K coronavirus cases a day across April, the U.S. is seeing roughly 20K cases a day in early June. The most-dire scenarios have been put to bed, for now. Hospitals are coping well. ICUs beds are widely available.
Zacks June Sector/Industry/Company Telescope
The Zacks Industry Rank setup in early June, predictably, was nothing to write home about.
As more reopened economic sectors gain traction, in more and more big U.S. states, this too shall pass. Take this month with a grain of salt.
The best groups are Utilities, Info Tech and Health Care. Those are the obvious “Stay-at-Home” plays.
Financials gained a notch, but still look shaky overall. Ditto Consumer Staples high “Stay-at-Home” plays, at the late point in COVID time.
Materials, Consumer Disc., Energy, and Industrials feel the most stress. There are some shiny niches though. Metals Non-Ferrous and Pipelines are worth looking into.
(1) Utilities went back to Very Attractive. Utilities-Gas Distribution looks excellent. Electric Power is looking good.
Zacks #2 Rank (BUY): Sempra Energy
Sempra Energy is a Southern California-based energy services holding company involved in the sale, distribution, storage and transportation of electricity and natural gas.
(2) Info Tech rose to Very Attractive from a Market Weight. Misc-Tech and Computer-Office Equipment were the best, followed by Computer-Software Services.
Zacks #2 Rank (BUY): Fortinet
Headquartered in Sunnyvale, CA, Fortinet is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide.
(3) Health Care stayed Attractive. Drugs led again, and by a wide margin.
Zacks #1 Rank (STRONG BUY): Abbvie
North Chicago, IL-based AbbVie has become one of the top-most pharma companies after it acquired Botox maker Allergan in a cash-and-stock deal for $63 billion in May 2020.
The deal is expected to transform AbbVie’s portfolio and lower its dependence on Humira, its flagship product, which has already lost patent protection in Europe and is due to face biosimilar competition in the United States in 2023.
AbbVie has one of the most popular cancer drugs in its portfolio, Imbruvica, and its newest drugs Skyrizi (risankizumab) and Rinvoq (upadacitinib) position it well for long-term growth.
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