Shares of Sonoco Products Co. (SON), a global manufacturer of consumer and industrial packaging products, reached a new 52-week high of $41.50 on Dec 27. Sonoco has a market cap of $4.21 billion. Average volume of shares traded over the last three months stood at approximately 360,349.
The company has delivered a one-year return of about 43.71% and year-to-date return of 43.47%, outperforming the S&P 500. Sonoco has long-term estimated earnings per share growth rate of 6.9%.
What’s Driving Sonoco Up?
Sonoco shares have trended upward following its third quarter earnings release on Oct 18. Adjusted earnings per share for Sonoco Products increased 14% to 63 cents in the third quarter. Net sales increased 3% year over year to $1.23 billion in the third quarter driven by gains in volume and mix from the Display and Packaging, Paper and Industrial Converted Products and Protective Solutions segments along with higher selling prices, partially offset by a decline in volume in the Consumer Packaging segment and the divestiture of box plant.
The stock was also aided by the announcements in the company’s investor meet on Dec 9; wherein Sonoco reiterated its financial targets for the fourth quarter and fiscal 2013 and initiated 2014 guidance. Sonoco highlighted on aggressive market-focused organic growth strategies that will position it well enough to double sales from the current growth rate for packaged consumer foods.
Sonoco maintained its fourth quarter and full-year 2013 earnings guidance of 55 cents to 59 cents. Compared with the 56 cents earned in the fourth quarter of 2012, the mid point of the 2013 guidance depicts a 2% rise. For 2013, earnings per share are expected to lie between $2.27 and $2.31 per share. The mid point of the guidance reflects a 4% improvement from the earnings of $2.21 in 2012.
For 2014, Sonoco projects earnings per share to be in the range of $2.45 to $2.53. Sonoco expects 2014 to be a record year, beating the previous record of $2.38 in 2007. The projected midpoint of $2.49 per share assumes a 9% increase over 2013 expected earnings. The improvement will be driven by modest volume growth, lower pension and post-retirement expenses and productivity gains. However, higher depreciation expenses, a slight increase in the effective tax rate and higher information technology and other expenses are expected to be the deterrents.
Sonoco plans to focus on businesses that cater to faster growing markets such as its Consumer Packaging and Protective Solutions businesses. It will also focus on selected emerging market opportunities for composite cans and tubes and cores. It will concentrate on growing flexible packaging in Brazil, Southeast Asia and North America; Protective Solutions, particularly in Consumer and Industrial molded foam markets serving growing appliance and automotive sectors in North America. It will also globally expand temperature assurance packaging - serving life science markets and tubes and cores in Eastern Europe, Russia and the Middle East, and composite cans in Poland, Malaysia and China.
Other Stocks to Consider
Sonoco currently retains a Zacks Rank #3 (Hold). Some other stocks worth considering in the sector include Packaging Corporation of America (PKG), Sealed Air Corporation (SEE) and UFP Technologies, Inc. (UFPT). While Packaging Corporation and Sealed Air hold a Zacks Rank #1 (Strong Buy), UFP Technologies carries a Zacks Rank #2 (Buy).
Read the Full Research Report on SEE
Read the Full Research Report on PKG
Read the Full Research Report on UFPT
Zacks Investment Research
- Consumer Discretionary
- Investment & Company Information
- Sonoco Products
- earnings per share