U.S. markets closed
  • S&P 500

    4,136.48
    -43.28 (-1.04%)
     
  • Dow 30

    33,926.01
    -127.93 (-0.38%)
     
  • Nasdaq

    12,006.96
    -193.86 (-1.59%)
     
  • Russell 2000

    1,985.53
    -15.69 (-0.78%)
     
  • Crude Oil

    73.23
    -2.65 (-3.49%)
     
  • Gold

    1,865.90
    -50.40 (-2.63%)
     
  • Silver

    22.40
    -1.22 (-5.17%)
     
  • EUR/USD

    1.0797
    -0.0114 (-1.05%)
     
  • 10-Yr Bond

    3.5320
    +0.1360 (+4.00%)
     
  • GBP/USD

    1.2056
    -0.0173 (-1.41%)
     
  • USD/JPY

    131.1500
    +2.5460 (+1.98%)
     
  • BTC-USD

    23,430.35
    -160.18 (-0.68%)
     
  • CMC Crypto 200

    535.42
    -1.43 (-0.27%)
     
  • FTSE 100

    7,901.80
    +81.64 (+1.04%)
     
  • Nikkei 225

    27,509.46
    +107.41 (+0.39%)
     

Sonoco (SON) Up 2.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Sonoco (SON). Shares have added about 2.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sonoco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sonoco Beats Earnings Estimates in Q3, Revenues Lag

Sonoco reported adjusted earnings per share of $1.60 in the third -quarter 2022, beating the Zacks Consensus Estimate of $1.43. The figure exceeded the company’s guidance of $1.35-$1.45. The bottom line improved 60% from the prior-year quarter’s levels, driven by strong strategic pricing performance across most of its businesses, the contribution from the Metal Packaging acquisition and productivity gains.

Including one-time items, the company reported EPS of $1.24, which compared favorably with the year-ago quarter’s earnings per share of $1.12.

Sonoco’s net sales were a record $1.89 billion, missing the Zacks Consensus Estimate of $1.91 billion. The top line surged 34% year over year, courtesy of strong pricing performance and sustained robust results from the Metal Packaging acquisition. However, the negative impact of foreign currency translation and lower industrial volumes somewhat negated the gains.

Operational Update

Cost of sales was $1.52 billion, 32% higher than the year-earlier quarter. Gross profit in the reported quarter totaled $367 million compared with the prior-year quarter’s $258 million. Gross margin came in at 19.4% compared with the year-ago quarter’s 18.2%.

Selling, general and administrative expenses amounted to $164 million, up 26% year over year. Adjusted operating income was $225 million during the reported quarter compared with the prior-year quarter’s $135 million.

Segment Performance

The Consumer Packaging segment’s net sales were up 72% year over year to a record $1031 million due to the addition of the Metal Packaging acquisition and pricing performance. Operating profit amounted to $128 million, up 93% from the prior-year quarter’s levels, primarily owing to earnings added by Metal Packaging, solid price/cost performance and favorable productivity.

Net sales in the Industrial Paper Packaging segment were $661 million, reflecting year-over-year growth of 4% due to strong pricing performance, modestly offset by the negative impacts of foreign exchange and lower volume/mix. Operating profit totaled $82 million, reflecting a 55% year-over-year improvement due to strategic pricing actions that helped offset impact of lower volume/mix.

Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, rose 10% year over year to $198 million. Operating profit for the segment totaled $15 million compared with the year-ago quarter’s $13 million.

Financial Performance

Sonoco reported cash and cash equivalents of $182 million at the end of the third quarter of 2022 compared with $171 million at the 2021-end. The company generated cash flow from operating activities of $322 for the first nine months of 2022, compared to $220 million in the same period of 2021.

As of Oct 2, 2022, total debt was $3.14 billion compared with $1.61 billion as of Dec 31, 2022. , primarily as a result of financing transactions used to fund the Metal Packaging acquisition in January 2022.
Guidance

Sonoco projects fourth-quarter 2022 adjusted earnings per share between $1.20 and $1.30. For 2022, the company now expects adjusted earnings per share between $6.40 and $6.50. Operating cash flow for the year is expected in the range of $565 to $615 million, while free cash flow is expected between $265 million to $315 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -5.69% due to these changes.

VGM Scores

Currently, Sonoco has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sonoco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Sonoco is part of the Zacks Containers - Paper and Packaging industry. Over the past month, AptarGroup (ATR), a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended September 2022 more than a month ago.

AptarGroup reported revenues of $836.86 million in the last reported quarter, representing a year-over-year change of +1.4%. EPS of $0.95 for the same period compares with $0.94 a year ago.

For the current quarter, AptarGroup is expected to post earnings of $0.77 per share, indicating a change of -17.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for AptarGroup. Also, the stock has a VGM Score of C.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Sonoco Products Company (SON) : Free Stock Analysis Report

AptarGroup, Inc. (ATR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research