JP Morgan downgrades consumer goods packaging company Silgan Holdings (SLGN ) to neutral from buy.
Analyst Amanda Tepper says she sees a poor outlook for Silgan's Plastics division. She notes Plastics operating margins declined 370 basis points year-over-year in the first quarter, after already dropping 200 basis points over past two years.
She thinks pricing is negative in this relatively commodity-like segment. She says growth for its Quick Top tab opener, a key earnings per share driver in its can business, is slowing. And she thinks it will be tougher for the food can division to continue to offset profit weakness in Plastics.
Tepper adds that the stock has not reacted well to positive news over the last two quarters. She sees $4.80 2005 earnings per share, and $5.05 2006 earnings per share.