Yahoo Finance Here's Why You Should Retain Sonoco (SON) in Your Portfolio
Sonoco Products Company SON has been benefiting from steady customer demand, recent acquisitions and productivity initiatives.
The company has a Zacks Rank #3 (Hold) and an average trailing four-quarter earnings surprise of 6.1%.
Sonoco’s shares have gained 7.1% in the past year compared with the industry’s growth of 4.6%.
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Growth Drivers
Sonoco will continue to benefit from its stable consumer demand. Its focus is on optimizing businesses through productivity improvement, standardization and cost control. The company has been implementing several synergy opportunities, including optimizing raw material purchases, leveraging indirect expenses, and coordinating supply-chain logistics that are expected to aid its results in the near term.
Recent acquisitions like Denmark-based Skjern in the fourth quarter of 2022 are expected to expand SON’s production capacity and help it capitalize on the growing market for sustainable paper and packaging products in Europe.
The company also acquired the remaining equity interest in RTS Packaging, LLC in November 2022 and Ball Metalpack (now Sonoco Metal Packaging) in January 2022. These acquisitions are well-aligned with Sonoco’s long-term strategy to focus on its core integrated businesses and expand its sustainable consumer packaging portfolio.
The company is implementing aggressive price actions across its businesses to counter higher raw material and non-material inflation. Continued strong recovery in price and costs across most of its businesses, benefits from the Metal Packaging acquisition, and solid demand are likely to contribute to SON’s 2023 results.
SON emphasizes capital allocation and expects to increase dividends while maintaining an investment-grade balance sheet. The company intends to increase returns on invested capital in the coming years through organic investments in core accretive acquisitions and portfolio rationalization.
Backed by the better-than-expected results in 2022, Sonoco expects adjusted earnings per share between $5.70 and $5.90. Compared with that reported in 2020, the mid-point of the guidance indicates witnessing a 15% CAGR.
A Few Concerns
The company faces headwinds from higher raw material, energy and freight costs. Supply-chain disruptions are also worrisome.
Moreover, Sonoco’s bottom-line results will be unfavorably impacted by foreign currency translation and divestitures, and increased SG&A expenses.
Volumes will be lower in the consumer packaging segment in the ongoing quarter due to seasonal factors.
Meanwhile, the impacts of continued softness in Europe and Asia, and seasonality and weak North America manufacturing volumes will get reflected in the Industrial Products segment’s performance.
Sonoco Products Company Price and Consensus
Sonoco Products Company price-consensus-chart | Sonoco Products Company Quote
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are OI Glass OI, Tenaris TS and Dover DOV. OI and TS flaunt a Zacks Rank #1 (Strong Buy) at present, and DOV has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
OI Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 16% north in the past 60 days. OI’s shares gained 102.1% in the last year.
Tenaris has an average trailing four-quarter earnings surprise of 11.5%. The Zacks Consensus Estimate for TS’ 2023 earnings is pegged at $6.12 per share. This indicates a 41.3% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 18.1% in the past 60 days. Its shares gained 22.4% in the last year.
The Zacks Consensus Estimate for Dover’s fiscal 2023 earnings per share is pegged at $8.99, suggesting an increase of 6.4% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 1.2% upward in the last 60 days. DOV has a trailing four-quarter average earnings surprise of 2.3%. Its shares gained 5.3% in the last year.
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O-I Glass, Inc. (OI) : Free Stock Analysis Report
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