Sonoco (SON) Misses on Q2 Earnings & Sales, Lowers '23 View
Sonoco Products Company SON reported adjusted earnings per share (EPS) of $1.38 in second-quarter 2023, missing the Zacks Consensus Estimate of $1.50. The figure came below the company’s guidance of $1.45-$1.55. The bottom line fell 22% from the prior-year quarter’s levels, driven by lower volumes.
Including one-time items, the company reported EPS of $1.16 compared with the year-ago quarter’s $1.33.
Sonoco’s net sales were $1,705 million, which missed the Zacks Consensus Estimate of $1,833 million. The top line fell 11% year over year, hurt by lower volumes.
Operational Update
The cost of sales was $1,348 million, 11.7% lower than the year-earlier quarter. The gross profit in the reported quarter totaled $357 million compared with the prior-year quarter’s $387 million. The gross margin came in at 20.9% compared with the year-ago quarter’s 20.2%.
Selling, general and administrative expenses amounted to $171 million, down 4.9% year over year.
Adjusted operating income was $211 million in the reported quarter compared with the prior-year quarter’s $250 million. The operating margin came in at 12.4%, down from the year-ago quarter’s 13.1%.
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 were down 7% year over year to $924 million, as volumes were impacted by destocking trends. We predicted the segment’s sales to be $968 million in the quarter. Operating profit amounted to $95 million, down 32% from the prior-year quarter. The reported figure missed our estimate of $114 million.
Net sales in the Industrial Paper Packaging segment were $585 million, reflecting a year-over-year dip of 20% due to a low volume and mix. Our estimate for the segment’s quarterly sales was $661 million. Operating profit totaled $87 million, reflecting an 8% year-over-year fall. We expected operating profit to be $91 million in the quarter.
Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, were $197 million, flat year over year. The reported figure lagged our projected sales of $203 million. Operating profit for the segment totaled $29 million compared with the year-ago quarter’s $17 million. We predicted operating income to be $20.7 million in the quarter.
Financial Performance
Sonoco reported cash and cash equivalents of $319 million at the end of the second quarter of 2023 compared with $227 million at the 2022-end. The company generated cash flow from operating activities of around $347 million in the first half of 2023 compared with the $184 million reported in the prior-year period.
As of Jul 2, 2023, total debt was $3.15 billion, down from $3.22 billion as of Dec 31, 2022.
Guidance
Sonoco projects a third-quarter 2023 adjusted EPS between $1.25 and $1.35.
The company lowered its adjusted EPS guidance for 2023 to $5.10-$5.40 from the previously disclosed $5.70-$6.00. SON anticipates low-volume trends in the Consumer Packaging and Industrial Paper Packaging businesses to continue for the rest of the year. A less favorable price/cost environment in Industrial during the second half of the year will also impact earnings.
The operating cash flow for the year is expected at $925-$975 million. The free cash flow is projected between $620 million and $720 million.
Price Performance
Sonoco’s shares have lost 4.6% in the past year compared with the industry’s fall of 0.1%.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Sonoco currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and W.W. Grainger, Inc. GWW. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, and GWW has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 52% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares have gained 58% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.86, up 1% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 56% in the last year.
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
The Manitowoc Company, Inc. (MTW) : Free Stock Analysis Report
Worthington Industries, Inc. (WOR) : Free Stock Analysis Report
Sonoco Products Company (SON) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
