uploads/2016/09/son-pm.png

Sonoco Products Plans to Sell Its Rigid Plastics Blow Molding Operations

By

Updated

Price movement

Sonoco Products (SON) has a market cap of $5.2 billion. It rose by 0.50% to close at $51.80 per share on September 1, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.08%, 2.8%, and 29.7%, respectively, on the same day.

SON is now trading 0.92% above its 20-day moving average, 2.7% above its 50-day moving average, and 14.5% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The PowerShares S&P Mid-Cap Low Volatility Portfolio (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 15.7% on September 1.

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

  • WestRock Company (WRK): $12.3 billion
  • AptarGroup (ATR): $4.9 billion
  • Bemis Company (BMS): $5.0 billion

Latest news on Sonoco

In a press release on September 1, 2016, Sonoco Products reported the following: “Sonoco (SON) today announced it has reached a definitive agreement to sell its rigid plastics blow molding operations to Amcor, a global leader of rigid and flexible packaging products, for $280 million. The transaction is subject to regulatory approvals in the United States.”

It also reported that “Sonoco’s rigid plastics blow molding operations include seven manufacturing facilities in the US and Canada with 850 employees producing containers serving the personal care and food and beverage markets.”

Article continues below advertisement

Performance of Sonoco Products in fiscal 2Q16

Sonoco Products reported fiscal 2Q16 net sales of ~$1.2 billion, which is 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, as compared to $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, as compared to 1.4x and ~0.7x, respectively, in fiscal 4Q15. It reported free cash flow of $31.9 million in fiscal 2Q16, which is 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

In the next part, we’ll discuss Verifone Systems (PAY).

Advertisement

More From Market Realist