Sonoco Products Company’s SON wholly-owned subsidiary — Sonoco-Alcore S.a.r.l. — intends to hike prices for paper-based tubes and cores by 7% in the EMEA region. The price hike will be effective relating to the shipments beginning on Jan 18, 2021.
Moreover, Sonoco Alcore announced to hike prices by €60 (£50) per ton for all recycled paperboard grades sold in these regions. This move is in response to the escalating costs and limited availability of waste paper across Europe. The price increases will be effective with shipments beginning on or after Jan 1, 2021.
So far, Sonoco has absorbed these costs by expanding the manufacturing footprint and supply-chain activities. However, given the rising inflation, the company now intends to pass on these costs to its customers while keeping its supply chain intact and fulfilling their needs.
Sonoco’s focus on optimizing businesses through productivity improvement, standardization and cost control will aid its performance in the near term. In addition, negative impacts of price/cost will likely be offset by stable Old Corrugated Containers (OCC) price, which is the largest raw material used by the company's recycled paperboard mills. These factors are likely to boost Sonoco’s operating margins.
Sonoco expects its Consumer Packaging segment to gain from the demand from the stay-at-home customers owing to the pandemic. Approximately 80% of the segment’s sales flow in from food packaging, where the company is witnessing increased orders. Further, its paperboard operations in North America are likely to be relatively steadier on elevated demand for the tissue and the towel market.
However, Sonoco’s industrial-related markets will continue to witness bleak demand due to the pandemic-induced shutdowns. The Paper and Industrial Converted Products segment will be affected by a negative price/cost relationship during the current quarter due to the higher year-over-year recycled fiber costs and lower market pricing.
Shares of Sonoco have gained 19.2% over the past three months, outperforming the industry's growth of 16.4%.
Zacks Rank & Stocks to Consider
Sonoco currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include iRobot Corporation IRBT, Deere & Company DE and Silgan Holdings Inc. SLGN. While iRobot and Deere flaunt a Zacks Rank #1 (Strong Buy), Silgan carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have appreciated 6.2% in the past three months.
Deere has an expected earnings growth rate of 46% for fiscal 2021. The stock has appreciated 23.5% over the past three months.
Silgan has a projected earnings growth rate of 37.9% for the current year. Over the past three months, the company’s shares have gained 2.7%.
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