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Sonoco (SON) Q3 Earnings & Sales Beat Estimates, Up Y/Y
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Sonoco Products Company (SON - Free Report) reported adjusted earnings per share of 91 cents in third-quarter 2021, which beat the Zacks Consensus Estimate of 89 cents. The figure came near the upper end of the company’s guidance of 87-93 cents. The bottom line improved 6% from the prior-year quarter, aided by benefits from volume/mix growth and productivity improvements, which were somewhat offset by a negative price/cost relationship and the impact from the divestiture of the company’s former display and packaging businesses.
Including one-time items, the company reported earnings per share of $1.12 compared with the year-ago quarter’s 82 cents.
Sonoco’s net sales were $1.42 billion, which beat the Zacks Consensus Estimate of $1.39 billion. The top line grew 7.8% on a year-over-year basis, driven by a 4% improvement in the volume/mix and higher selling prices to combat inflation. The disposition of the company's European and U.S. display and packaging contract businesses in November 2020 and April 2021 had a negative impact.
Operational Update
Cost of sales was $1,157 million, 9.6% higher than the year-earlier quarter’s $1,055 million. Gross profit during the reported quarter totaled $258 million compared with the prior-year quarter’s $257 million. Gross margin came in at 18.2% compared with the year-ago quarter’s 19.6%.
Selling, general and administrative expenses amounted to $131 million, up 4% year over year. This resulted from the return to more normalized expenses for medical benefits and management incentives. The adjusted operating income declined 6.2% year over year to $122.4 million during the reported quarter. The operating margin came in at 8.6%, down from the year-ago quarter’s 9.9%.
Sonoco Products Company Price, Consensus and EPS Surprise
The Consumer Packaging segment’s net sales were up 9.6% year over year to $599 million, driven by higher selling prices, contribution from the Can Packaging acquisition and a positive business mix. The operating profit amounted to $61 million, reflecting a decline of 5.4% from prior-year quarter due to a negative price/cost relationship stemming from raw material and non-material inflation, partly offset by productivity improvements.
Net sales in the Industrial Paper Packaging segment totaled $635 million, reflecting year-over year growth of 29.5% on higher selling prices and improved volume/mix. The operating profit totaled $53 million, reflecting a 30% year-over-year improvement, on positive volume/mix and strong productivity improvements.
Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, dropped 34.4% year over year to $181 million. This decline was primarily due to the disposition of the display and packaging businesses. The operating profit for the segment came in at $8.2 million compared with the year-ago quarter’s $25.1 million.
Financial Performance
Sonoco reported cash and cash equivalents of $160 million at the end of third-quarter 2021 compared with $565 million at the end of 2020. The company generated cash flow from operating activities of around $220 million during the first nine months of 2021 compared with $489 in the prior-year period. Free cash flow was $74 million in the first nine months of 2021 compared with $381 million in the prior-year period.
As of Oct 3, 2021, total debt was $1.47 billion, compared with $1.70 billion as of Dec 31, 2020. At the end of third-quarter 2021, Sonoco’s total debt to total capital was 44.1% compared with 47.1% at the end of 2020.
Guidance
Sonoco projects fourth-quarter 2021 adjusted earnings per share between 84 cents and 90 cents compared with the earnings of 82 cents reported in fourth-quarter 2020.
For 2021, the company now expects adjusted earnings per share of $3.49-$3.55. In 2020, it reported adjusted earnings per share of $3.41. The company projects demand for its products to be strong. It will continue to bear the brunt of raw material and non-material cost inflation, primarily energy, freight and packaging costs. Sonoco has been aggressively trying to boost productivity, control costs and implement price hikes to negate these impacts.
Price Performance
The company’s shares have gained 1.9%, so far this year, compared with the industry’s rally of 10.8%.
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Sonoco (SON) Q3 Earnings & Sales Beat Estimates, Up Y/Y
Sonoco Products Company (SON - Free Report) reported adjusted earnings per share of 91 cents in third-quarter 2021, which beat the Zacks Consensus Estimate of 89 cents. The figure came near the upper end of the company’s guidance of 87-93 cents. The bottom line improved 6% from the prior-year quarter, aided by benefits from volume/mix growth and productivity improvements, which were somewhat offset by a negative price/cost relationship and the impact from the divestiture of the company’s former display and packaging businesses.
Including one-time items, the company reported earnings per share of $1.12 compared with the year-ago quarter’s 82 cents.
Sonoco’s net sales were $1.42 billion, which beat the Zacks Consensus Estimate of $1.39 billion. The top line grew 7.8% on a year-over-year basis, driven by a 4% improvement in the volume/mix and higher selling prices to combat inflation. The disposition of the company's European and U.S. display and packaging contract businesses in November 2020 and April 2021 had a negative impact.
Operational Update
Cost of sales was $1,157 million, 9.6% higher than the year-earlier quarter’s $1,055 million. Gross profit during the reported quarter totaled $258 million compared with the prior-year quarter’s $257 million. Gross margin came in at 18.2% compared with the year-ago quarter’s 19.6%.
Selling, general and administrative expenses amounted to $131 million, up 4% year over year. This resulted from the return to more normalized expenses for medical benefits and management incentives. The adjusted operating income declined 6.2% year over year to $122.4 million during the reported quarter. The operating margin came in at 8.6%, down from the year-ago quarter’s 9.9%.
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 9.6% year over year to $599 million, driven by higher selling prices, contribution from the Can Packaging acquisition and a positive business mix. The operating profit amounted to $61 million, reflecting a decline of 5.4% from prior-year quarter due to a negative price/cost relationship stemming from raw material and non-material inflation, partly offset by productivity improvements.
Net sales in the Industrial Paper Packaging segment totaled $635 million, reflecting year-over year growth of 29.5% on higher selling prices and improved volume/mix. The operating profit totaled $53 million, reflecting a 30% year-over-year improvement, on positive volume/mix and strong productivity improvements.
Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, dropped 34.4% year over year to $181 million. This decline was primarily due to the disposition of the display and packaging businesses. The operating profit for the segment came in at $8.2 million compared with the year-ago quarter’s $25.1 million.
Financial Performance
Sonoco reported cash and cash equivalents of $160 million at the end of third-quarter 2021 compared with $565 million at the end of 2020. The company generated cash flow from operating activities of around $220 million during the first nine months of 2021 compared with $489 in the prior-year period. Free cash flow was $74 million in the first nine months of 2021 compared with $381 million in the prior-year period.
As of Oct 3, 2021, total debt was $1.47 billion, compared with $1.70 billion as of Dec 31, 2020. At the end of third-quarter 2021, Sonoco’s total debt to total capital was 44.1% compared with 47.1% at the end of 2020.
Guidance
Sonoco projects fourth-quarter 2021 adjusted earnings per share between 84 cents and 90 cents compared with the earnings of 82 cents reported in fourth-quarter 2020.
For 2021, the company now expects adjusted earnings per share of $3.49-$3.55. In 2020, it reported adjusted earnings per share of $3.41. The company projects demand for its products to be strong. It will continue to bear the brunt of raw material and non-material cost inflation, primarily energy, freight and packaging costs. Sonoco has been aggressively trying to boost productivity, control costs and implement price hikes to negate these impacts.
Price Performance
The company’s shares have gained 1.9%, so far this year, compared with the industry’s rally of 10.8%.
Zacks Rank and Stocks to Consider
Sonoco currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Industrial Products sector include Nordson Corporation (NDSN - Free Report) , ScanSource, Inc. (SCSC - Free Report) and DXP Enterprises, Inc. (DXPE - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordson has an anticipated earnings growth rate of 45.2% for fiscal 2021. The company’s shares have gained around 22%, year to date.
ScanSource has an estimated earnings growth rate of 17.9% for the ongoing fiscal year. Year to date, the company’s shares have rallied 39%.
DXP Enterprises has a projected earnings growth rate of 77.6% for the current year. The stock has appreciated around 49%, so far this year.