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Sonoco Products Company (SON - Free Report) raised its first-quarter 2022 earnings guidance on the back of the company’s year-to-date results and upbeat prediction for the remaining period of the current quarter. It now expects adjusted earnings per share (EPS) in between $1.70 and $1.80 for the March-end quarter, up from its previous guidance of $1.25-$1.35. The updated guidance indicates year-over-year growth of 75% at mid-point. In first-quarter 2021, the company reported an adjusted EPS of $1.00. Following this, the company’s shares have gained 6% in the last trading session.
Strong recovery in price and cost across most of its businesses are likely to deliver improved operating results in the first quarter. The Ball Metalpack acquisition as well as stellar demand in the Consumer Packaging segment and All Other groups of businesses (protective, healthcare, retail and industrial plastics) are expected to drive operating performance.
Sonoco is focused on driving profitable growth, margin expansion and generating solid free cash flow. Its balance sheet strength and availability of substantial liquidity in the form of cash and revolving credit facilities will continue to drive growth. Operating cash flow for the year is expected in the range of $690-$740 million and free cash flow is expected between $365 million and $415 million. Both are significantly above 2021 results.
Sonoco is benefiting from strong demand in most of its consumer and industrial businesses. In the fourth quarter’s earnings call, the company provided adjusted EPS guidance of $4.60 to $4.80 for the current year, with a mid-point target of $4.70 per share. It had reported earnings of $3.55 per share in 2021. Robust demand, productivity initiatives, improvement in volume/mix, benefit from lower interest expenses and reduced shares outstanding are likely to favorably impact the bottom line in the current year.
Sonoco’s consumer packaging businesses experienced pandemic-driven demand for certain consumer products like food and household products last year. The company is now witnessing a normalization of demand from the heightened at-home eating trends. It anticipates the COVID-impacted markets, such as confectionery, food service and construction products, to continue on the path to recovery. The company’s industrial-served markets will gain from continued strong demand for global tubes, cores and cones. The ThermoSafe cold chain packaging business will continue to benefit from strong demand for temperature-assured shippers for transporting COVID vaccines. The company's plastics business, which serves the healthcare industry, will gain from improved demand for elective surgeries.
SON’s focus on optimizing businesses through productivity improvement, standardization and cost control will also boost results. Nevertheless, Sonoco will continue to bear the brunt of raw material, energy and freight cost pressures and the impact of the COVID-19 pandemic on global supply chains.
Price Performance
Sonoco’s shares have gained 3.9% in the past six months, compared with the industry’s growth of 4.2%.
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2021), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal-year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 13.9% in the past six months.
AGCO Corp's fourth-quarter 2021 adjusted EPS increased 100% year over year to $3.08, beating the Zacks Consensus Estimate of $1.72. AGCO has a trailing four-quarter earnings surprise of 56.6%, on average. In a six month’s period, the company’s shares have gained 11.8%.
AGCO Corp has an estimated earnings growth rate of around 12.4% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 10.5%.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. SLGN has moved up 19.2% in the past six months.
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Sonoco (SON) Ups Q1 Guidance on Strong Demand & Price Recovery
Sonoco Products Company (SON - Free Report) raised its first-quarter 2022 earnings guidance on the back of the company’s year-to-date results and upbeat prediction for the remaining period of the current quarter. It now expects adjusted earnings per share (EPS) in between $1.70 and $1.80 for the March-end quarter, up from its previous guidance of $1.25-$1.35. The updated guidance indicates year-over-year growth of 75% at mid-point. In first-quarter 2021, the company reported an adjusted EPS of $1.00. Following this, the company’s shares have gained 6% in the last trading session.
Strong recovery in price and cost across most of its businesses are likely to deliver improved operating results in the first quarter. The Ball Metalpack acquisition as well as stellar demand in the Consumer Packaging segment and All Other groups of businesses (protective, healthcare, retail and industrial plastics) are expected to drive operating performance.
Sonoco is focused on driving profitable growth, margin expansion and generating solid free cash flow. Its balance sheet strength and availability of substantial liquidity in the form of cash and revolving credit facilities will continue to drive growth. Operating cash flow for the year is expected in the range of $690-$740 million and free cash flow is expected between $365 million and $415 million. Both are significantly above 2021 results.
Sonoco is benefiting from strong demand in most of its consumer and industrial businesses. In the fourth quarter’s earnings call, the company provided adjusted EPS guidance of $4.60 to $4.80 for the current year, with a mid-point target of $4.70 per share. It had reported earnings of $3.55 per share in 2021. Robust demand, productivity initiatives, improvement in volume/mix, benefit from lower interest expenses and reduced shares outstanding are likely to favorably impact the bottom line in the current year.
Sonoco’s consumer packaging businesses experienced pandemic-driven demand for certain consumer products like food and household products last year. The company is now witnessing a normalization of demand from the heightened at-home eating trends. It anticipates the COVID-impacted markets, such as confectionery, food service and construction products, to continue on the path to recovery. The company’s industrial-served markets will gain from continued strong demand for global tubes, cores and cones. The ThermoSafe cold chain packaging business will continue to benefit from strong demand for temperature-assured shippers for transporting COVID vaccines. The company's plastics business, which serves the healthcare industry, will gain from improved demand for elective surgeries.
SON’s focus on optimizing businesses through productivity improvement, standardization and cost control will also boost results. Nevertheless, Sonoco will continue to bear the brunt of raw material, energy and freight cost pressures and the impact of the COVID-19 pandemic on global supply chains.
Price Performance
Sonoco’s shares have gained 3.9% in the past six months, compared with the industry’s growth of 4.2%.
Image Source: Zacks Investment Research
Zacks Rank and Other Stocks to Consider
Sonoco currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Industrial Products sector include Applied Industrial Technologies, Inc. (AIT - Free Report) , AGCO Corporation (AGCO - Free Report) and Silgan Holdings Inc. (SLGN - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2021), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal-year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 13.9% in the past six months.
AGCO Corp's fourth-quarter 2021 adjusted EPS increased 100% year over year to $3.08, beating the Zacks Consensus Estimate of $1.72. AGCO has a trailing four-quarter earnings surprise of 56.6%, on average. In a six month’s period, the company’s shares have gained 11.8%.
AGCO Corp has an estimated earnings growth rate of around 12.4% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 10.5%.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. SLGN has moved up 19.2% in the past six months.