Sonoco Products Company’s (SON - Free Report) first-quarter 2019 adjusted earnings increased 14.8% year over year to 85 cents per share. Earnings also outpaced the higher end of management’s guided range of 77-83 cents. Also, the reported figure beat the Zacks Consensus Estimate of 80 cents.
On a reported basis, including one-time items, earnings per share came in at 73 cents, flat year over year.
Sonoco’s net sales grew 3.8% year over year to $1.35 billion in the quarter. This upside was driven by acquisitions and higher selling prices, partly offset by negative foreign currency-exchange impact. The sales figure, however, missed the Zacks Consensus Estimate of $1.37 billion.
Operational Update
Cost of sales came in at $1.08 billion, up 2.8% year over year. Gross profit during the first quarter totaled $270 million, marking an 8% improvement year over year. Gross margin came in at 20% compared with the prior-year quarter’s 19%.
Selling, general and administrative expenses totaled $142.5 million, up 3.7% year over year, primarily resulting from acquisition-related costs. Adjusted operating income increased 13% year over year to $128 million during the Jan-March quarter. Operating margin came in at 9.5% compared with 8.7% recorded in the year-ago quarter.
Sonoco Products Company Price, Consensus and EPS Surprise
Segment Performance
The Consumer Packaging segment reported net sales of $590 million, up 3.5% from $570 million recorded in the prior-year quarter. Operating profit went up to $62 million from $61 million witnessed in the comparable period last year.
Net sales in the Paper and Industrial Converted Products segment came in at $496 million, representing an increase of 7.8% year over year on the Conitex acquisition and higher selling prices, partly offset by foreign exchange and lower volume. Operating profit totaled $48.4 million, up 21.6% year over year.
The Display and Packaging segment’s net sales slipped 3.5% year over year to $137.6 million. The segment’s operating profit significantly increased to $6.5 million compared to the $1.7 million reported in the year-earlier quarter.
The Protective Solution segment’s net sales came in at $128.4 million, down 2% year over year on lower volume. Operating profit of the segment improved 3% year over year to $11 million.
Financial Performance
Sonoco reported cash and cash equivalents of $124.3 million at the end of the first quarter compared with $305.2 million at the end of the prior-year quarter. The company recorded cash flow from operating activities of $92.3 million in the reported quarter compared with $119.8 million witnessed in the year-earlier period.
As of the first quarter’s end, long-term debt was $1.19 billion, relatively flat with the 2018 end figure. As of Mar 31 2019, the company’s total debt-to-capital ratio was 43.9%, flat with year-end 2018.
Guidance
For 2019, Sonoco raised its adjusted earnings per share guidance to $3.52-$3.62 from the prior view of $3.47-$3.57. Operating cash flow and free cash flow guidance remained unchanged. Operating cash flow is expected in the range of $600-$620 million, and free cash flow is anticipated between $225 million and $245 million.
For second-quarter 2019, the company projects adjusted earnings per share of 93-99 cents compared with the year-ago quarter’s 93 cents.
Share Price Performance
Over the past year, Sonoco has outperformed the industry it belongs to. The stock has appreciated around 17.6% compared with the industry’s 0.8% growth.
Zacks Rank and Other Key Picks
Sonoco currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Industrial Products sector are DMC Global Inc. (BOOM - Free Report) , Lawson Products, Inc. and DXP Enterprises, Inc. (DXPE - 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.
DMC Global has an estimated earnings growth rate of 77.3% for the ongoing year. The company’s shares have soared 117%, in the past year.
Lawson Products has an expected earnings growth rate of a whopping 102.5% for the current year. The stock has appreciated 35% in a year’s time.
DXP Enterprises has a projected earnings growth rate of 21.6% for 2019. The company’s shares have gained 24%, over the past year.
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Sonoco Products Company’s (SON - Free Report) first-quarter 2019 adjusted earnings increased 14.8% year over year to 85 cents per share. Earnings also outpaced the higher end of management’s guided range of 77-83 cents. Also, the reported figure beat the Zacks Consensus Estimate of 80 cents.
On a reported basis, including one-time items, earnings per share came in at 73 cents, flat year over year.
Sonoco’s net sales grew 3.8% year over year to $1.35 billion in the quarter. This upside was driven by acquisitions and higher selling prices, partly offset by negative foreign currency-exchange impact. The sales figure, however, missed the Zacks Consensus Estimate of $1.37 billion.
Operational Update
Cost of sales came in at $1.08 billion, up 2.8% year over year. Gross profit during the first quarter totaled $270 million, marking an 8% improvement year over year. Gross margin came in at 20% compared with the prior-year quarter’s 19%.
Selling, general and administrative expenses totaled $142.5 million, up 3.7% year over year, primarily resulting from acquisition-related costs. Adjusted operating income increased 13% year over year to $128 million during the Jan-March quarter. Operating margin came in at 9.5% compared with 8.7% recorded in the year-ago quarter.
Sonoco Products Company Price, Consensus and EPS Surprise
Segment Performance
The Consumer Packaging segment reported net sales of $590 million, up 3.5% from $570 million recorded in the prior-year quarter. Operating profit went up to $62 million from $61 million witnessed in the comparable period last year.
Net sales in the Paper and Industrial Converted Products segment came in at $496 million, representing an increase of 7.8% year over year on the Conitex acquisition and higher selling prices, partly offset by foreign exchange and lower volume. Operating profit totaled $48.4 million, up 21.6% year over year.
The Display and Packaging segment’s net sales slipped 3.5% year over year to $137.6 million. The segment’s operating profit significantly increased to $6.5 million compared to the $1.7 million reported in the year-earlier quarter.
The Protective Solution segment’s net sales came in at $128.4 million, down 2% year over year on lower volume. Operating profit of the segment improved 3% year over year to $11 million.
Financial Performance
Sonoco reported cash and cash equivalents of $124.3 million at the end of the first quarter compared with $305.2 million at the end of the prior-year quarter. The company recorded cash flow from operating activities of $92.3 million in the reported quarter compared with $119.8 million witnessed in the year-earlier period.
As of the first quarter’s end, long-term debt was $1.19 billion, relatively flat with the 2018 end figure. As of Mar 31 2019, the company’s total debt-to-capital ratio was 43.9%, flat with year-end 2018.
Guidance
For 2019, Sonoco raised its adjusted earnings per share guidance to $3.52-$3.62 from the prior view of $3.47-$3.57. Operating cash flow and free cash flow guidance remained unchanged. Operating cash flow is expected in the range of $600-$620 million, and free cash flow is anticipated between $225 million and $245 million.
For second-quarter 2019, the company projects adjusted earnings per share of 93-99 cents compared with the year-ago quarter’s 93 cents.
Share Price Performance
Over the past year, Sonoco has outperformed the industry it belongs to. The stock has appreciated around 17.6% compared with the industry’s 0.8% growth.
Zacks Rank and Other Key Picks
Sonoco currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Industrial Products sector are DMC Global Inc. (BOOM - Free Report) , Lawson Products, Inc. and DXP Enterprises, Inc. (DXPE - 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.
DMC Global has an estimated earnings growth rate of 77.3% for the ongoing year. The company’s shares have soared 117%, in the past year.
Lawson Products has an expected earnings growth rate of a whopping 102.5% for the current year. The stock has appreciated 35% in a year’s time.
DXP Enterprises has a projected earnings growth rate of 21.6% for 2019. The company’s shares have gained 24%, over the past year.
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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