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Sonoco Announces Its New Investment Plan

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Price movement

Sonoco Products (SON) has a market cap of $5.2 billion. It fell by 0.93% to close at $52.38 per share on September 8, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 1.6%, 2.4%, and 31.2%, respectively, on the same day. SON is trading 1.4% above its 20-day moving average, 3.0% above its 50-day moving average, and 15.1% above its 200-day moving average.

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Related ETF and peers

The PowerShares S&P Mid-Cap Low Volatility Portfolio ETF (XMLV) invests 1.3% of its holdings in Sonoco. The ETF tracks a volatility-weighted index of the 80 least volatile S&P Mid-Cap 400 companies. The YTD price movement of XMLV was 16.9% on September 8.

The market caps of Sonoco Products’ competitors are as follows:

  • WestRock (WRK) — $12.1 billion
  • AptarGroup (ATR) — $4.9 billion
  • Bemis (BMS) — $4.9 billion

Latest news on Sonoco

In a press release on September 8, 2016, Sonoco Products reported that “Sonoco Europe has expanded its production sites for injection-molded rigid plastic packaging in Zwenkau, Germany. By investing approximately 8 million Euros and adding 25 new employees, the Hockenheim-based company aims to increase production capacity and improve the location’s energy efficiency.”

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Performance of Sonoco Products in fiscal 2Q16

Sonoco Products reported fiscal 2Q16 net sales of ~$1.2 billion, a fall of 3.4% from the net sales of ~$1.3 billion in fiscal 2Q15. Sales from its Consumer Packaging, Display & Packaging, and Paper & Industrial Converted Products segments fell by 3.8%, 7.6%, and 3.5%, respectively.

Sales from its Protective Solutions segment rose by 2.8% between fiscal 2Q15 and fiscal 2Q16. The company’s gross profit margin rose by 4.3% and its income before interest and taxes fell by 7.0%. Its net income and EPS (earnings per share) fell to $56.3 million and $0.55, respectively, in fiscal 2Q16, compared with $64.4 million and $0.63 in fiscal 2Q15.

SON’s cash and cash equivalents fell by 41.0% and its inventories rose by 3.1% between fiscal 4Q15 and fiscal 2Q16. Its current ratio rose to 1.5x and its long-term debt-to-equity ratio fell to 0.65x in fiscal 2Q16, compared with 1.4x and ~0.7x, respectively, in fiscal 4Q15. It reported free cash flow of $31.9 million in fiscal 2Q16, a fall of 0.93% from fiscal 2Q15.

Projections

Sonoco Products projected EPS in the range of $0.65–$0.70 for fiscal 3Q16. The company has made the following projections for fiscal 2016:

  • EPS in the range of $2.68–$2.74
  • effective tax rate of 31.5%
  • free cash flow of ~$140 million, which reflects an operating cash flow of $490 million

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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