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Strength Seen in Sonoco (SON): Can Its 5% Jump Turn into More Strength?

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·2 min read
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Sonoco (SON) shares rallied 5% in the last trading session to close at $54.79. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 9.2% loss over the past four weeks.

Sonoco has raised its guidance for the second quarter of 2022, backed by the solid demand trend witnessed so far in the quarter, leading to an uptick in its share price. The company now expects adjusted earnings per share to be in the range of $1.60 to $1.70, which is 30% higher than its prior expectation of $1.20 to $1.30 per share. The mid-point of the new guidance suggests a year-on-year growth of 70%.

Solid customer demand, particularly in the Consumer Packaging and All Other segments, as well as continued pricing gains, led to the guidance hike. The continued strong performance of the Metal Packaging business, which was acquired in the first quarter of 2022, is also expected to boost operating results in the quarter.

This packaging maker is expected to post quarterly earnings of $1.28 per share in its upcoming report, which represents a year-over-year change of +52.4%. Revenues are expected to be $1.85 billion, up 33.7% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Sonoco, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on SON going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Sonoco is part of the Zacks Containers - Paper and Packaging industry. Graphic Packaging (GPK), another stock in the same industry, closed the last trading session 0.2% lower at $19.45. GPK has returned -4.9% in the past month.

Graphic Packaging's consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.52. Compared to the company's year-ago EPS, this represents a change of +100%. Graphic Packaging currently boasts a Zacks Rank of #1 (Strong Buy).

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