Today's PPI Report Bodes Well For Silgan's Earnings Tomorrow

Includes: CCK, REXMY, SLGN
by: William Trent, CFA

Small Cap Watch List member Silgan Holdings (NASDAQ:SLGN) says in their latest 10K:

We are the largest manufacturer of metal food containers in North America, with a unit volume market share for the year ended December 31, 2006 of approximately half of the market in the United States, a leading manufacturer of plastic containers in North America for a variety of markets, including the personal care, health care, household and industrial chemical and pet care markets, and a leading worldwide manufacturer of metal, composite and plastic vacuum closures for food and beverage products.

It is often nice to find a small cap company with a dominant market share in its niche. It is even nicer when that niche is doing well. Today’s PPI report (.pdf) shows that the recent trend of strong pricing power in the canning industry continues. In fact, the chart is rather impressive.

fruit and vegetable canning

Not only is pricing power near the high end of the 10-year range, it is in a general rising trend. The only concern is whether that bend at the end is just a bend or whether it is the start of a new trend. Whatever the case, though, this chart bodes well for Silgan’s earnings report tomorrow.

This trend should also be good for Silgan’s competitors, which include Ball Corporation (NYSE:BLL), Crown Holdings (NYSE:CCK), Rexam (OTCQX:REXMY) and Constar International (CNST).

SLGN 1-yr chart:

SLGN 1-yr chart