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Here's Why Investor Should Retain Sonoco (SON) Stock Now
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Sonoco Products Company (SON - Free Report) is benefiting from robust end-market demand and a strong recovery in price and cost across most of its businesses. The Ball Metalpack acquisition, productivity initiatives and improved volume/mix are likely to aid the company’s margin. Focus on increasing investment in its core consumer and industrial businesses and pricing actions will drive growth. However, foreign currency translation, higher costs and non-recurring COVID-related incentives will dent results.
Positive Earnings Surprise History: Sonoco, carrying a Zacks Rank #3 (Hold), has a trailing four-quarter average earnings surprise of 1.85%. The company has an estimated long-term earnings growth rate of 5%.
Positive Growth Expectations: The Zacks Consensus Estimate for 2022 earnings is currently pegged at $5.38, indicating year-over-year growth of 51.5%. In the past 60 days, earnings estimate for the current year has gone up by 10%.
Upbeat Guidance: For 2022, the company expects adjusted earnings per share (EPS) to be between $5.25 and $5.45. Sonoco had earlier provided adjusted EPS guidance of $4.60-$4.80 for the year. Robust demand, positive price/cost, productivity initiatives, improvement in volume/mix, benefit from lower interest expenses and reduced shares outstanding are likely to impact bottom-line results in 2022.
Underpriced: Considering Sonoco’s price-to-earnings ratio, shares are underpriced at the current level, which is attractive for investors. The company has a trailing P/E ratio of 13.4, below the industry average of 14.5.
Valuation is Inexpensive: The company’s trailing 12-month EV/EBITDA ratio is 6.6 compared with the industry's average trailing 12-month EV/EBITDA ratio of 19.5.
Price Performance
Shares of Sonoco have gained 5.3% in the past three months compared with the industry's growth of 4.6%.
Image Source: Zacks Investment Research
Other Growth Drivers in Place
Sonoco’s Consumer Packaging segment is primarily benefiting from the Metal Packaging acquisition. This buyout supports U.S customers’ rising preference for metal packaging due to its inherent attributes of recyclability and sustainability. The segment’s flexible packaging business is gaining from strong demand for confectionery, food service and other food products. Plastic food packaging reflects higher demand in the fresh and prepared food markets.
Demand for Industrial Paper Packaging products has returned to pre-pandemic levels in most of the global markets. The company’s industrial-served markets will gain from strong demand for global tubes, cores and cones. Due to supply chain challenges, the company decided to delay the conversion of its Hartsville paper machine to the third quarter of 2022. This delay is expected to cause less downtime and will provide favorable results in the Industrial Paper Packaging segment in the second quarter of 2022.
SON’s ThermoSafe cold chain packaging business will continue to gain traction from strong demand for temperature-assured packaging, retail security packaging, industrial plastics, and molded foam components. Its plastics business, which serves the healthcare industry, will benefit from improved demand for elective surgeries.
Sonoco is focused on increasing investment in its core consumer and industrial businesses and achieving an annual EBITDA of $1 billion by 2026. It will spend around $25 million in the capital on the Metal Packaging business this year, including increasing two-piece production in Milwaukee and Chestnut Hill facilities. Given the strong demand for food product and services, SON will invest $60 million over the next two years in its flexible packaging operations. Sonoco is focused on growing in niche food markets and launching new products with new customers.
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 cash and revolving credit facilities will stoke growth. The company is implementing aggressive price actions across its businesses to counter higher raw material and non-material inflation. SON’s focus on optimizing businesses through productivity improvement and standardization will also aid results in the near term.
However, 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. Unfavorable impacts of foreign currency translation, non-recurring COVID-related incentives and increased SG&A expenses are likely to dent the company’s performance.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings rose 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 4% in the past year.
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Here's Why Investor Should Retain Sonoco (SON) Stock Now
Sonoco Products Company (SON - Free Report) is benefiting from robust end-market demand and a strong recovery in price and cost across most of its businesses. The Ball Metalpack acquisition, productivity initiatives and improved volume/mix are likely to aid the company’s margin. Focus on increasing investment in its core consumer and industrial businesses and pricing actions will drive growth. However, foreign currency translation, higher costs and non-recurring COVID-related incentives will dent results.
Positive Earnings Surprise History: Sonoco, carrying a Zacks Rank #3 (Hold), has a trailing four-quarter average earnings surprise of 1.85%. The company has an estimated long-term earnings growth rate of 5%.
Positive Growth Expectations: The Zacks Consensus Estimate for 2022 earnings is currently pegged at $5.38, indicating year-over-year growth of 51.5%. In the past 60 days, earnings estimate for the current year has gone up by 10%.
Upbeat Guidance: For 2022, the company expects adjusted earnings per share (EPS) to be between $5.25 and $5.45. Sonoco had earlier provided adjusted EPS guidance of $4.60-$4.80 for the year. Robust demand, positive price/cost, productivity initiatives, improvement in volume/mix, benefit from lower interest expenses and reduced shares outstanding are likely to impact bottom-line results in 2022.
Underpriced: Considering Sonoco’s price-to-earnings ratio, shares are underpriced at the current level, which is attractive for investors. The company has a trailing P/E ratio of 13.4, below the industry average of 14.5.
Valuation is Inexpensive: The company’s trailing 12-month EV/EBITDA ratio is 6.6 compared with the industry's average trailing 12-month EV/EBITDA ratio of 19.5.
Price Performance
Shares of Sonoco have gained 5.3% in the past three months compared with the industry's growth of 4.6%.
Image Source: Zacks Investment Research
Other Growth Drivers in Place
Sonoco’s Consumer Packaging segment is primarily benefiting from the Metal Packaging acquisition. This buyout supports U.S customers’ rising preference for metal packaging due to its inherent attributes of recyclability and sustainability. The segment’s flexible packaging business is gaining from strong demand for confectionery, food service and other food products. Plastic food packaging reflects higher demand in the fresh and prepared food markets.
Demand for Industrial Paper Packaging products has returned to pre-pandemic levels in most of the global markets. The company’s industrial-served markets will gain from strong demand for global tubes, cores and cones. Due to supply chain challenges, the company decided to delay the conversion of its Hartsville paper machine to the third quarter of 2022. This delay is expected to cause less downtime and will provide favorable results in the Industrial Paper Packaging segment in the second quarter of 2022.
SON’s ThermoSafe cold chain packaging business will continue to gain traction from strong demand for temperature-assured packaging, retail security packaging, industrial plastics, and molded foam components. Its plastics business, which serves the healthcare industry, will benefit from improved demand for elective surgeries.
Sonoco is focused on increasing investment in its core consumer and industrial businesses and achieving an annual EBITDA of $1 billion by 2026. It will spend around $25 million in the capital on the Metal Packaging business this year, including increasing two-piece production in Milwaukee and Chestnut Hill facilities. Given the strong demand for food product and services, SON will invest $60 million over the next two years in its flexible packaging operations. Sonoco is focused on growing in niche food markets and launching new products with new customers.
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 cash and revolving credit facilities will stoke growth. The company is implementing aggressive price actions across its businesses to counter higher raw material and non-material inflation. SON’s focus on optimizing businesses through productivity improvement and standardization will also aid results in the near term.
However, 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. Unfavorable impacts of foreign currency translation, non-recurring COVID-related incentives and increased SG&A expenses are likely to dent the company’s performance.
Stocks to Consider
Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation of America (PKG - Free Report) . While GPK and MYE flaunt a Zacks Rank #1 (Strong Buy), PKG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings rose 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 4% in the past year.