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Is a Beat in the Cards for Sonoco (SON) in Q4 Earnings?

Zacks Equity Research

Sonoco Products Company SON is scheduled to report fourth-quarter and full-year 2017 results on Feb 15, before the market opens. In the last reported quarter, the company recorded a 5.6% increase in earnings per share while revenues rose 9.6%.

 

In the last reported quarter, AptarGroup’s earnings per share beat the Zacks Consensus Estimate by a margin of 2.70%. The company witnessed an average positive earnings surprise of 1.51% in the trailing four quarters.

 

Let’s see how things are shaping up for this announcement.

 

Sonoco Products Company Price and EPS Surprise

 

Sonoco Products Company Price and EPS Surprise

Sonoco Products Company price-eps-surprise | Sonoco Products Company Quote

Key Factors to Consider

For fourth-quarter 2017, the company anticipates earnings per share in the range of 68-74 cents. Compared with the prior-year quarter’s earnings per share of 62 cents, the mid-point of the guidance reflects year-over-year growth of 14.5%. The Zacks Consensus estimate for earnings per share is at 73 cents, reflecting a 17.7% increase year over year.

 

Higher resin prices during the fourth quarter will be a headwind to Sonoco’s polymer-based packaging businesses. The storms that hit the United States could impact consumers buying habits and consequently the revenues. Sonoco’s small paper converting operation in Puerto Rico has been shut down as Hurricane Maria struck. Production from the plant will be impacted while power and logistics infrastructure is rebuilt.

 

However, revenues will benefit from acquisitions made over the last year. Sonoco has made adjustments to portfolio adjustments in the last year to position the company for growth and gain market share in rapidly growing consumer markets. In July, Sonoco closed the Clear Lam Packaging acquisition and also concluded the buyout of Peninsula in March 2017. Further, the company has been implementing price increases to counter escalating raw material costs.

 

Sonoco has made adjustments to portfolio adjustments in the last year to position the company for growth, gain market share in faster growing consumer markets. In July, Sonoco closed the Clear Lam Packaging acquisition and completed the acquisition of Peninsula in March 2017.

 

The Zacks Consensus Estimate for revenues for the fourth quarter is at $1.27 billion, reflecting a 10.8% year-over-year growth.

 

 

Over the past three months, shares of Sonoco have dipped 1.9%, narrower than the 2.3% decline suffered by the industry.

 

Earnings Whispers

 

Our proven model shows that Sonoco is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.

 

Zacks ESP: The Earnings ESP for Sonoco is +0.91%. This is because the Most Accurate estimate of 74 cents is pegged higher than the Zacks Consensus Estimate of 73 cents.  A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: Sonoco currently carries a Zacks Rank #3. It should be noted that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings.

 

Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement.

 

The combination of Sonoco’s Zacks Rank #3 and Earnings ESP of +0.91% makes us reasonably confident of a likely earnings beat.

 

Stocks Worth Considering

 

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

 

Boise Cascade Company BCC has an Earnings ESP of +15.79% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. Boise Cascade’s shares have surged 58% in the past year.

 

MasTec, Inc. MTZ has an Earnings ESP of +3.10% and a Zacks Rank #2. Its shares have gone up 27% in a year’s time.

 

The Earnings ESP for Cintas Corporation CTAS is +1.04%. It carries a Zacks Rank #2. Shares of Cintas have gone up 31% in a year’s time.

 

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