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Sonoco Products Company (SON - Free Report) reported adjusted earnings of 90 cents in first-quarter 2021, surpassing the Zacks Consensus Estimate of 85 cents. This was driven by benefits from productivity gains and improved volume/mix. The figure also met the higher end of management’s guidance of 80-90 cents. The bottom line, however, declined 4.2% year over year due to the negative impact of price/cost stemming from higher raw material costs, and freight and other non-material inflation.
On a reported basis, including one-time items, the company reported earnings per share of 71 cents compared with the year-ago quarter’s 80 cents.
Sonoco’s net sales were $1.35 billion, which beat the Zacks Consensus Estimate of $1.32 billion. The top line also recorded year-over-year growth of 3.8% on improvement in volume/mix, higher selling prices and benefits from the Can Packaging acquisition.
Operational Update
Cost of sales were $1,075 million compared with the year-earlier quarter’s $1,036 million. Gross profit during the reported quarter totaled $278 million, up 4.1% year over year. Gross margin came in at 20.5%, flat year on year.
Selling, general and administrative expenses amounted to $145 million, flaring up 17% year over year. Adjusted operating income declined 2.9% year over year to $139.6 million during the reported quarter. Operating margin came in at 10.3% compared with the year-ago quarter’s 11%.
The Consumer Packaging segment’s net sales were up 7.7% year over year to $583 million. Operating profit amounted to $76 million, reflecting an increase of 18.7% from the $64 million seen in the comparable period last year.
Net sales in the Industrial Paper Packaging segment totaled $565 million, reflecting year-over year growth of 12.5%. Operating profit totaled $50.2 million compared with the $59.6 million reported in the year-ago period.
The All Other segment’s net sales dropped 21.1% year over year to $205 million. The segment reported an operating profit of $14 million, 33.3% lower than the year-earlier quarter.
Financial Performance
Sonoco reported cash and cash equivalents of $588 million at the end of first-quarter 2021 compared with $565 million at the end of 2020. The company generated cash flow from operating activities of $139 million during the March-end quarter, highlighting an improvement from the prior-year quarter’s $88 million. Free cash flow was $99.4 million in the first-quarter 2021 compared with $57.1 million in the comparable period last year.
As of Apr 4, 2021, total debt was $1.70 billion, flat as of Dec 31, 2020. At the end of first-quarter 2021, Sonoco’s total debt to total capital was 47% compared with 47.1% at the end of 2020.
Guidance
Sonoco projects second-quarter 2021 adjusted earnings per share (EPS) to lie between 82 cents and 88 cents compared with the earnings of 79 cents reported in second-quarter 2020. For 2021, the company raised its adjusted earnings per share guidance to $3.50-$3.60 from the prior range of $3.50 to $3.60. In 2020, the company reported adjusted EPS of $3.41. The guidance is based on the assumption that global business activity will continue to improve on government stimulus measures and reopening of business.
The company estimates cash flow from operations to range between $570 million and $600 million in 2021 and free cash flow is expected in the range of $270 million to $300 million.
Sonoco anticipates higher costs for recycled fiber and resins in the second quarter. In fact, chemicals, adhesives, freight and other operational costs are likely to be higher until supply chains stabilize. Notably, the company has implemented several pricing actions in response to these price hikes.
Sonoco expects the Consumer Packaging segment to continue benefiting from consumers' at-home eating habits. Demand for industrial businesses is also likely to remain solid in the current year. Moreover, uncoated recycled paperboard demand is strong globally and backlogs in North America are at the highest levels. Apart from this, Sonoco’s tube, core and cone products are witnessing escalating demand.
Price Performance
The company’s shares have gained 36.9% in the past year compared with the industry’s growth of 54.6%.
Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 133.2%.
ACCO Brands has an estimated earnings growth rate of 62.8% for the ongoing year. The company’s shares have gained 57.7% in the past year.
Astec has an expected earnings growth rate of 14.3% for 2021. The stock has surged 111.9% in a year’s time.
Zacks Top 10 Stocks for 2021
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Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Sonoco (SON) Tops Q1 Earnings & Revenues, Hikes '21 Guidance
Sonoco Products Company (SON - Free Report) reported adjusted earnings of 90 cents in first-quarter 2021, surpassing the Zacks Consensus Estimate of 85 cents. This was driven by benefits from productivity gains and improved volume/mix. The figure also met the higher end of management’s guidance of 80-90 cents. The bottom line, however, declined 4.2% year over year due to the negative impact of price/cost stemming from higher raw material costs, and freight and other non-material inflation.
On a reported basis, including one-time items, the company reported earnings per share of 71 cents compared with the year-ago quarter’s 80 cents.
Sonoco’s net sales were $1.35 billion, which beat the Zacks Consensus Estimate of $1.32 billion. The top line also recorded year-over-year growth of 3.8% on improvement in volume/mix, higher selling prices and benefits from the Can Packaging acquisition.
Operational Update
Cost of sales were $1,075 million compared with the year-earlier quarter’s $1,036 million. Gross profit during the reported quarter totaled $278 million, up 4.1% year over year. Gross margin came in at 20.5%, flat year on year.
Selling, general and administrative expenses amounted to $145 million, flaring up 17% year over year. Adjusted operating income declined 2.9% year over year to $139.6 million during the reported quarter. Operating margin came in at 10.3% compared with the year-ago quarter’s 11%.
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’s net sales were up 7.7% year over year to $583 million. Operating profit amounted to $76 million, reflecting an increase of 18.7% from the $64 million seen in the comparable period last year.
Net sales in the Industrial Paper Packaging segment totaled $565 million, reflecting year-over year growth of 12.5%. Operating profit totaled $50.2 million compared with the $59.6 million reported in the year-ago period.
The All Other segment’s net sales dropped 21.1% year over year to $205 million. The segment reported an operating profit of $14 million, 33.3% lower than the year-earlier quarter.
Financial Performance
Sonoco reported cash and cash equivalents of $588 million at the end of first-quarter 2021 compared with $565 million at the end of 2020. The company generated cash flow from operating activities of $139 million during the March-end quarter, highlighting an improvement from the prior-year quarter’s $88 million. Free cash flow was $99.4 million in the first-quarter 2021 compared with $57.1 million in the comparable period last year.
As of Apr 4, 2021, total debt was $1.70 billion, flat as of Dec 31, 2020. At the end of first-quarter 2021, Sonoco’s total debt to total capital was 47% compared with 47.1% at the end of 2020.
Guidance
Sonoco projects second-quarter 2021 adjusted earnings per share (EPS) to lie between 82 cents and 88 cents compared with the earnings of 79 cents reported in second-quarter 2020. For 2021, the company raised its adjusted earnings per share guidance to $3.50-$3.60 from the prior range of $3.50 to $3.60. In 2020, the company reported adjusted EPS of $3.41. The guidance is based on the assumption that global business activity will continue to improve on government stimulus measures and reopening of business.
The company estimates cash flow from operations to range between $570 million and $600 million in 2021 and free cash flow is expected in the range of $270 million to $300 million.
Sonoco anticipates higher costs for recycled fiber and resins in the second quarter. In fact, chemicals, adhesives, freight and other operational costs are likely to be higher until supply chains stabilize. Notably, the company has implemented several pricing actions in response to these price hikes.
Sonoco expects the Consumer Packaging segment to continue benefiting from consumers' at-home eating habits. Demand for industrial businesses is also likely to remain solid in the current year. Moreover, uncoated recycled paperboard demand is strong globally and backlogs in North America are at the highest levels. Apart from this, Sonoco’s tube, core and cone products are witnessing escalating demand.
Price Performance
The company’s shares have gained 36.9% in the past year compared with the industry’s growth of 54.6%.
Zacks Rank and Stocks to Consider
Sonoco currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Industrial Products sector include Deere & Co. (DE - Free Report) , ACCO Brands Corporation (ACCO - Free Report) and Astec Industries, Inc. (ASTE - Free Report) , each sporting a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 133.2%.
ACCO Brands has an estimated earnings growth rate of 62.8% for the ongoing year. The company’s shares have gained 57.7% in the past year.
Astec has an expected earnings growth rate of 14.3% for 2021. The stock has surged 111.9% in a year’s time.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>