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Sonoco's (SON) Earnings & Revenues Miss Estimates in Q2
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Sonoco Products Company’s (SON - Free Report) second-quarter 2019 adjusted earnings increased 2.2% year over year to 95 cents per share. Earnings came within the management’s guidance of 93-99 cents. However, the reported figure missed the Zacks Consensus Estimate of 97 cents.
On a reported basis, including one-time items, earnings per share came in at 80 cents, compared with the year-ago quarter’s 88 cents.
Sonoco’s net sales came in at $1.36 billion, marginally down from the prior-year quarter’s $1.37 billion. The downside primarily resulted from lower volume and stronger U.S. dollar, partly offset by increased sales from acquisitions. The sales figure also missed the Zacks Consensus Estimate of $1.42 billion.
Operational Update
Cost of sales came in at $1.08 billion compared with the $1.09 billion recorded in the year-earlier quarter. Gross profit during the second quarter totaled $275 million, slightly down from the year-ago quarter’s $276 million. Gross margin came in at 20.2%, flat year on year.
Selling, general and administrative expenses totaled $132.2 million, down 6.2% year over year, primarily resulting from acquisition-related costs. Adjusted operating income increased 4.4% year over year to $144.3 million during the April-June quarter. Operating margin came in at 10.6% compared with the 10.1% recorded in the year-ago quarter.
Sonoco Products Company Price, Consensus and EPS Surprise
The Consumer Packaging segment reported net sales of $603 million, down 2.2% from $616 million recorded in the prior-year quarter. Operating profit edged down to $62.9 million from $63.7 million witnessed in the comparable period last year.
Net sales in the Paper and Industrial Converted Products segment came in at $491.3 million, representing an increase of 3.6% year over year on the Conitex acquisition, partly offset by foreign exchange and lower volume. Operating profit totaled $61.2 million compared to the $61.5 million recorded in the comparable period last year.
The Display and Packaging segment’s net sales slipped 5.9% year over year to $134.8 million. The segment reported an operating profit of $5.9 million compared with an operating loss of $0.57 million reported in the year-earlier quarter.
The Protective Solution segment’s net sales came in at $130.8 million, down 1.6% year over year on lower volume. Operating profit of the segment improved 4.8% year over year to $14.3 million.
Financial Performance
Sonoco reported cash and cash equivalents of $96.3 million at the end of the second quarter compared with $197.7 million witnessed at the end of the prior-year quarter. The company recorded cash flow from operating activities of $40 million in the reported quarter compared with $251.2 million in the year-earlier period.
As of the second quarter’s end, long-term debt was $1.18 billion compared with the $1.19 billion recorded at the end of 2018. As of Jun 30, 2019, the company’s total debt-to-capital ratio was 45.5% compared with 43.9% reported at the end of 2018.
Acquisition
This May, Sonoco signed an agreement to acquire Corenso Holdings America, Inc. from Madison Dearborn Partners, LLC, for a cash consideration of $110 million. The deal is expected to close in this year’s third quarter.
Guidance
For 2019, Sonoco maintained its adjusted earnings per share guidance of $3.52-$3.62. Nevertheless, the company lowered its operating cash flow and free cash flow guidance. Operating cash flow is expected between $435 million and $455 million compared with the prior estimate of $600 million to $620 million. Free cash flow is projected at $60-$80 million compared with the previous expectation of $225 million and $245 million.
For the ongoing quarter, the company projects adjusted earnings per share of 88-94 cents compared with the year-ago quarter’s 86 cents.
Share Price Performance
Over the past year, Sonoco has outperformed the industry it belongs to. The stock has appreciated around 11.9% compared with the industry’s loss of 27.1%.
Roper Technologies has an estimated earnings growth rate of 9.8% for the ongoing year. The company’s shares have gained 33.4% in the past year.
John Bean Technologies has an expected earnings growth rate of 5.9% for the current year. The stock has appreciated 30.1% in a year’s time.
CECO Environmental has a projected earnings growth rate of 84.8% for 2019. The company’s shares have rallied 7.6% over the past year.
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Sonoco's (SON) Earnings & Revenues Miss Estimates in Q2
Sonoco Products Company’s (SON - Free Report) second-quarter 2019 adjusted earnings increased 2.2% year over year to 95 cents per share. Earnings came within the management’s guidance of 93-99 cents. However, the reported figure missed the Zacks Consensus Estimate of 97 cents.
On a reported basis, including one-time items, earnings per share came in at 80 cents, compared with the year-ago quarter’s 88 cents.
Sonoco’s net sales came in at $1.36 billion, marginally down from the prior-year quarter’s $1.37 billion. The downside primarily resulted from lower volume and stronger U.S. dollar, partly offset by increased sales from acquisitions. The sales figure also missed the Zacks Consensus Estimate of $1.42 billion.
Operational Update
Cost of sales came in at $1.08 billion compared with the $1.09 billion recorded in the year-earlier quarter. Gross profit during the second quarter totaled $275 million, slightly down from the year-ago quarter’s $276 million. Gross margin came in at 20.2%, flat year on year.
Selling, general and administrative expenses totaled $132.2 million, down 6.2% year over year, primarily resulting from acquisition-related costs. Adjusted operating income increased 4.4% year over year to $144.3 million during the April-June quarter. Operating margin came in at 10.6% compared with the 10.1% recorded in the year-ago quarter.
Sonoco Products Company Price, Consensus and EPS Surprise
Sonoco Products Company price-consensus-eps-surprise-chart | Sonoco Products Company Quote
Segment Performance
The Consumer Packaging segment reported net sales of $603 million, down 2.2% from $616 million recorded in the prior-year quarter. Operating profit edged down to $62.9 million from $63.7 million witnessed in the comparable period last year.
Net sales in the Paper and Industrial Converted Products segment came in at $491.3 million, representing an increase of 3.6% year over year on the Conitex acquisition, partly offset by foreign exchange and lower volume. Operating profit totaled $61.2 million compared to the $61.5 million recorded in the comparable period last year.
The Display and Packaging segment’s net sales slipped 5.9% year over year to $134.8 million. The segment reported an operating profit of $5.9 million compared with an operating loss of $0.57 million reported in the year-earlier quarter.
The Protective Solution segment’s net sales came in at $130.8 million, down 1.6% year over year on lower volume. Operating profit of the segment improved 4.8% year over year to $14.3 million.
Financial Performance
Sonoco reported cash and cash equivalents of $96.3 million at the end of the second quarter compared with $197.7 million witnessed at the end of the prior-year quarter. The company recorded cash flow from operating activities of $40 million in the reported quarter compared with $251.2 million in the year-earlier period.
As of the second quarter’s end, long-term debt was $1.18 billion compared with the $1.19 billion recorded at the end of 2018. As of Jun 30, 2019, the company’s total debt-to-capital ratio was 45.5% compared with 43.9% reported at the end of 2018.
Acquisition
This May, Sonoco signed an agreement to acquire Corenso Holdings America, Inc. from Madison Dearborn Partners, LLC, for a cash consideration of $110 million. The deal is expected to close in this year’s third quarter.
Guidance
For 2019, Sonoco maintained its adjusted earnings per share guidance of $3.52-$3.62. Nevertheless, the company lowered its operating cash flow and free cash flow guidance. Operating cash flow is expected between $435 million and $455 million compared with the prior estimate of $600 million to $620 million. Free cash flow is projected at $60-$80 million compared with the previous expectation of $225 million and $245 million.
For the ongoing quarter, the company projects adjusted earnings per share of 88-94 cents compared with the year-ago quarter’s 86 cents.
Share Price Performance
Over the past year, Sonoco has outperformed the industry it belongs to. The stock has appreciated around 11.9% compared with the industry’s loss of 27.1%.
Zacks Rank and Stocks to Consider
Sonoco currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Roper Technologies, Inc. (ROP - Free Report) , John Bean Technologies Corp. (JBT - Free Report) and CECO Environmental Corp. (CECO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here
Roper Technologies has an estimated earnings growth rate of 9.8% for the ongoing year. The company’s shares have gained 33.4% in the past year.
John Bean Technologies has an expected earnings growth rate of 5.9% for the current year. The stock has appreciated 30.1% in a year’s time.
CECO Environmental has a projected earnings growth rate of 84.8% for 2019. The company’s shares have rallied 7.6% over the past year.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
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