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Sonoco (SON) Arm Hikes Prices for Tubes and Cores in EMEA

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Sonoco Products Company’s (SON - Free Report) wholly-owned subsidiary Sonoco Alcore S.a.r.l is implementing price increase by 8% for all tube and core grades sold in the company’s EMEA (Europe, Middle East & Africa) regions. The price hike will be effective for all shipments starting Sep 1.

The company is executing price-rise actions in response to the escalating cost pressure on the business. Raw material cost has been on a rise since the beginning of this year and management expects these to flare up further. Apart from this, the company is facing increased transport, packaging, energy and labor costs. Sonoco’s focus on optimizing businesses through productivity improvement, standardization and cost control will aid its performance in the upcoming period.

Last month, the company reported second-quarter 2021 adjusted earnings of 84 cents, missing the Zacks Consensus Estimate of 87 cents. The bottom line, however, improved 6% from the prior-year quarter aided by benefits from volume/mix growth and productivity improvements.

Revenues of $1.38 billion surpassed the Zacks Consensus Estimate of $1.32 billion and grew 11% year over year. This was driven by improvement in volume/mix, solid demand recovery in most of the industrial-related businesses, higher selling prices to combat inflation and contribution from the Can Packaging acquisition.

Sonoco expects adjusted earnings per share to lie between $3.50 and $3.60 for the current year. In 2020, it reported adjusted earnings per share of $3.41. For third-quarter 2021, Sonoco projects adjusted earnings per share between 87 cents and 93 cents compared with the earnings of 86 cents reported in third-quarter 2020.

Sonoco expects its consumer-related business volumes will be above the pre-pandemic levels despite more normalized demand for food packaging as consumers’ moderate at-home eating patterns. It believes the confectionery, food service and construction products markets will continue to recover which had been mostly impacted by the pandemic. Sonoco’s industrial-served markets will gain from the historically-high backlogs for uncoated recycled paperboard in the United States and Canada, coupled with robust demand for global tubes, cores and cones returning to the pre-pandemic levels.

Meanwhile, Sonoco’s Consumer Packaging and Industrial Paper Packaging segments are likely to witness a negative price/cost in the third quarter due to rising recycled fiber and resin prices as well as higher freight costs.

Price Performance

Sonoco’s shares have gained 10.7%, so far this year, compared with the industry's rally of 14.2%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Sonoco currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Lincoln Electric Holdings, Inc. (LECO - Free Report) and Lindsay Corporation (LNN - Free Report) . While Encore Wire and Lincoln Electric sport a Zacks Rank #1 (Strong Buy), Lindsay carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.

Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.

Lindsay has an estimated earnings growth rate of 17.4% for fiscal 2021. The company’s shares have gained 35%, so far this year.