Sonoco (SON) Earnings Miss Estimates in Q4, Decline Y/Y
Sonoco Products Company SON reported adjusted earnings per share of $1.02 in the fourth quarter of 2023, missing the Zacks Consensus Estimate of $1.07. The figure came within the company’s guidance of $1.01-$1.16. The bottom line fell 20% from the prior-year quarter’s level.
Including one-time items, the company reported earnings of 82 cents, which compared unfavorably with the year-ago quarter’s 98 cents.
Sonoco’s net sales were $1.64 billion, beating the Zacks Consensus Estimate of $1.59 billion. The top line, however, fell 2.4% year over year on lower volumes and pricing.
Operational Update
The cost of sales was around $1.3 billion, 4.8% lower than the year-earlier quarter. Gross profit in the reported quarter totaled $340 million compared with the prior-year quarter’s $314 million. The gross margin came in at 20.8% compared with the year-ago quarter’s 18.7%.
Selling, general and administrative expenses amounted to $200 million, up 15.6% year over year. Adjusted operating income was $167 million compared with the prior-year quarter’s $184 million.
Sonoco Products Company Price, Consensus and EPS Surprise
Sonoco Products Company price-consensus-eps-surprise-chart | Sonoco Products Company Quote
Segmental Performance
The Consumer Packaging segment’s net sales declined 2.6% year over year to $856 million, as volumes were impacted by lower consumer purchases. We predicted the segment’s sales to be $913 million in the quarter. Operating profit amounted to $83 million, down 2.4% from the prior-year quarter. The reported figure topped our estimate of $76 million.
Net sales in the Industrial Paper Packaging segment were $593 million, reflecting a year-over-year dip of 0.2% due to a low volume and mix. Our estimate for the segment’s quarterly sales was $522 million. Operating profit totaled $62 million, reflecting a 21.5% year-over-year fall. We expected an operating profit of $67 million for the quarter.
Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, were $187 million, down 6.5% year over year. The reported figure missed our projected sales of $199 million. Operating profit for the segment totaled $22 million compared with the year-ago quarter’s $20 million. We predicted an operating income of $20 million for the quarter.
Financial Performance
Sonoco reported cash and cash equivalents of $152 million at the end of Dec 31, 2023, compared with $227 million at the end of Dec 31, 2022. The company generated cash flow from operating activities of $883 million for 2023 compared with $509 million in 2022.
As of Dec 31, 2023, total debt was $3.1 billion compared with $3.2 billion as of Dec 31, 2022.
2023 Performance
Sonoco reported adjusted earnings per share (EPS) of $5.26 in 2023 compared with $6.48 in the prior year. The figure came in line with the company's revised guidance of $5.25-$5.40. The bottom line missed the Zacks Consensus Estimate of $5.31.
Including one-time items, the company reported earnings of $4.80 per share compared with $4.72 in 2023.
Sales were down 6.5% year over year to $6.78 billion. The top line surpassed the Zacks Consensus Estimate of $6.73 billion.
Guidance
Sonoco projects first-quarter 2024 adjusted EPS between $1.05 and $1.15.
For 2024, the company expects an adjusted EPS of $5.10-$5.40. Adjusted EBITDA is expected between $1.05 billion and $1.10 billion, The operating cash flow for the year is expected between $650 million and $750 million.
Price Performance
Sonoco’s shares have lost 4.1% in the past year compared with the industry’s fall of 1.4%.
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Zacks Rank & Stocks to Consider
Sonoco currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Cadre Holdings, Inc. CDRE, AZZ Inc. AZZ and Applied Industrial Technologies AIT. CDRE currently sports a Zacks Rank #1 (Strong Buy), and AZZ and AIT carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.11 per share. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE shares have gained 41.2% in the past year.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved north by 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 76.7% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been unchanged in the past 60 days. The company’s shares have gained 32.2% in the past year.
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