On May 23, 2016, we issued an updated research report on Sonoco Products Co. (SON Quick QuoteSON - Free Report) , a global manufacturer of consumer and industrial packaging products.

Sonoco reported adjusted earnings of 65 cents per share in first-quarter 2016, up 35% year over year. It was a record performance with each business segment reporting solid year-over-year improvement. This included historical performances in its targeted growth segments – Consumer Packaging and Protective Solutions.

Given such a strong start to 2016 despite headwinds from a strong U.S. dollar and generally flat-to-weak economic conditions, Sonoco reiterated its earnings per share guidance in the range of $2.64 to $2.74. Compared to prior-year results, the guidance reflects an expected benefit of approximately 7 cents per share from lower pension expense. Sonoco remains focused on further improving its cost competitiveness by optimizing its supply chain, enhancing productivity, and streamlining corporate and business unit structures.

Sonoco also remains committed to its ‘Grow and Optimize’ strategy, which is focused on targeted growth of its Consumer Packaging and Protective Solutions businesses and optimization of its Industrial-focused businesses. The company will also launch several innovative products in 2016, as it continues to work closely with customers through its i6 Innovation Process, utilizing the full capability of the recently opened IPS Studio in Hartsville. According to the company, there are ample opportunities that would accelerate growth and optimize its customers’ operations in Europe.

Sonoco has capital growth projects in the pipeline through 2017 that will help expand its global production capability in composite cans, flexible packaging and rigid plastic containers. In consumer packaging, Sonoco will add more capacity to its new composite can plant in Kutno, Poland.  The introduction of a third line to this facility is in the pipeline for this year and Sonoco plans to add a fourth by mid 2017. The ramp-up of the Kuala Lumpur plant in Malaysia is also on track, delivering profits despite start-up costs. The company plans to add a new composite can line at its new plant in Shanghai, China, and follow it up with the development of a second new plant in South China in the next two years.

Sonoco plans to develop a new rigid paper product technology engineered by its European rigid packaging operations for commercial development at its West Chicago, IL, can plant. In the flexible packaging business, Sonoco completed the installation and began operating a triplex laminator at its Morristown, TE plant. A new rotogravure press for its Waco, TX facility is also on schedule and will start trials this July. Sonoco also added a new portion control and food tray capacity in its thermoforming operations and  expanded the capacity of its Beauty Park, OH blow-molding facility in rigid plastics to meet customer demand.

These positives have been reflected in the northward movement of the Zacks Consensus Estimate for Sonoco over the past 30 days. The Zacks Consensus Estimate for the second quarter has gone up 4% to 71 cents and for 2016 it has gone up 1% to $2.70.  

Other Stocks to Consider
 
At present, Sonoco carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the same industry include Avery Dennison Corporation (AVY Quick QuoteAVY - Free Report) , Berry Plastics Group, Inc. (BERY Quick QuoteBERY - Free Report) and Crown Holdings Inc. (CCK Quick QuoteCCK - Free Report) . All of these stocks carry the same Zacks Rank as Sonoco.

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