Sonoco Products Company (NYSE:SON) shareholders are probably feeling a little disappointed, since its shares fell 3.9% to US$53.21 in the week after its latest quarterly results. The result was positive overall - although revenues of US$1.3b were in line with what the analysts predicted, Sonoco Products surprised by delivering a statutory profit of US$0.82 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, Sonoco Products' twelve analysts currently expect revenues in 2021 to be US$5.13b, approximately in line with the last 12 months. Statutory earnings per share are predicted to jump 28% to US$3.36. Before this earnings report, the analysts had been forecasting revenues of US$5.28b and earnings per share (EPS) of US$3.43 in 2021. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The average price target was steady at US$55.30even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Sonoco Products at US$63.00 per share, while the most bearish prices it at US$42.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.8%, a significant reduction from annual growth of 2.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sonoco Products is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$55.30, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Sonoco Products going out to 2024, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 3 warning signs for Sonoco Products that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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