Sonoco (SON) Gears Up for Q3 Earnings: A Beat in Store?

Sonoco Products Company SON is scheduled to report third-quarter 2019 results on Oct 17, before the opening bell. The quarterly results are likely to reflect benefit from acquisitions, pricing initiatives, lower tax rate and cost-control measures, which will help negate the impact of higher input costs.

In the last reported quarter, Sonoco’s earnings missed the Zacks Consensus Estimate by a margin of 2.06%. However, the company delivered a positive earnings surprise in three of the trailing four quarters, the average beat being 3.19%.

Sonoco Products Company Price and EPS Surprise

Sonoco Products Company Price and EPS Surprise

Sonoco Products Company price-eps-surprise | Sonoco Products Company Quote

Earnings Whispers

Our proven model shows that Sonoco is likely to beat estimates in the third quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Earnings ESP: Earnings ESP for Sonoco is +4.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sonoco currently carries a Zacks Rank of 3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

It should be noted that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Sonoco’s top-line in the September-ending quarter is likely to reflect benefits of the company’s pricing initiatives, and the Conitex and Highland Packaging Solutions acquisitions. Meanwhile, the bottom line is expected to reflect the impact of a lower tax rate in the to-be-reported results. Further, the company’s focus on optimizing businesses through process improvement, standardization and cost control is likely to have aided the quarter’s margins.

However, weakening global economic conditions and the uncertainty of tariffs trade disputes and regional policy concerns weighed on consumer confidence in the third quarter. Inflationary cost pressure from higher freight, wages, energy as well as the elevated cost for materials is likely to have constrained the company’s third-quarter margins.

Sonoco’s third-quarter 2019 earnings is estimated to be 88-94 cents per share. The mid-point of the guidance indicates a 5.8% improvement from the year-ago reported figure of 86 cents. The Zacks Consensus Estimate for quarterly earnings is pegged at 91 cents, suggesting 5.81% growth from the prior-year quarter.

For third-quarter revenues, the consensus mark stands at $1.38 billion, suggesting 1.46% growth from the year-ago quarter.

Key Developments in Q3

Sonoco completed the acquisition of Corenso Holdings America during the third quarter. Notably, the deal creates a long-term opportunity for Sonoco by expanding its paperboard and core converting operations. The buyout will be modestly accretive to Sonoco’s earnings in the current year.

Price Performance

In a year’s time, shares of Sonoco have gained 9.9% against the industry’s 27.1% decline.

Stocks to Consider

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Cintas Corporation CTAS has an Earnings ESP of +0.16% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV has an Earnings ESP of +0.33% and a Zacks Rank #3.

Northwest Pipe Company NWPX, a Zacks #3 Ranked stock, has an Earnings ESP of +19.23%.

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