Sonoco Products Company (SON - Free Report) recently announced that the company will implement a price hike of 4% for all composite cans and corresponding metal ends in the United States and Canada. The price hike, which will be effective with shipments beginning on Aug 1, has been made to counter the inflating raw material costs due to tariffs on steel and aluminum.
The principal raw materials used by Sonoco are recovered paper, paperboard, steel, aluminum and plastic resins which are purchased from several outside sources. Recently, the Trump administration imposed tariffs of 25% on steel imports and 10% on aluminum imports from Canada, Mexico and the European Union. This led to elevation in cost of raw materials by suppliers which might strain earnings. Further, volatility in key raw material prices might make pricing recovery more challenging.
Notably, Sonoco is expected to face inflationary pressure, ranging from higher freight costs, increased labor costs and elevated costs for materials in 2018. Resin prices were up 10-15% year over year in first-quarter 2018. The company expects that it will further increase in second-quarter 2018.
However, the company remains focused to ease inflation, through the continued internal roll out of the Sonoco Performance System. Its productivity efforts will help reduce the company’s unit-cost-to-produce. Sonoco expects its overall price/cost to be positive in 2018 and overall volume to increase around 2%.
For full-year 2018, Sonoco raised its adjusted earnings per share guidance to $3.22-$3.32, reflecting a downward revision in the expected effective tax rate and projected earnings accretion from the Highland Packaging acquisition. The mid-point of the guidance reflects year-over-year growth of 17%.
Share Price Performance
Sonoco’s shares have outperformed the industry with respect to price, over the past year. The company’s shares have gained around 6%, while the industry recorded loss of 2%.
Zacks Rank & Stocks to Consider
Sonoco carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same sector are Actuant Corporation (ATU - Free Report) , DMC Global Inc. (BOOM - Free Report) and Chart Industries, Inc. (GTLS - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Actuant has a long-term earnings growth rate of 15.6%. Its shares have rallied 17% over the past year.
DMC Global has a long-term earnings growth rate of 20%. The company’s shares have appreciated a whopping 269% in the past year.
Chart Industries has a long-term earnings growth rate of 26.9%. The stock has surged 83% in a year’s time.
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