uploads/2016/09/son-pm-2.png

SON’s Paper-Based Tubes and Cores Just Got More Expensive

By

Updated

Price movement

Sonoco Products (SON) has a market cap of $5.2 billion. It rose by 1.6% to close at $52.61 per share on September 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.2%, 3.9%, and 31.8%, respectively, on the same day.

SON is trading 2.4% above its 20-day moving average, 4.2% above its 50-day moving average, and 16.1% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The PowerShares S&P Mid-Cap Low Volatility 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 17.0% on September 2.

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

  • WestRock Company (WRK) — $12.2 billion
  • AptarGroup (ATR) — $4.9 billion
  • Bemis Company (BMS) — $5.0 billion

Latest news on Sonoco

Sonoco Products’ wholly owned subsidiary Sonoco-Alcore will increase its prices for paper-based tubes and cores by up to 8% due to a rise in raw material costs, depending on product category, to all customers in Europe. This rise in prices will be effective on shipments beginning on October 1, 2016.

Article continues below advertisement

Performance of Sonoco Products in 2Q16

Sonoco Products reported 2Q16 net sales of ~$1.2 billion, a fall of 3.4% from its net sales of ~$1.3 billion in 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 2Q15 and 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 2Q16, compared to $64.4 million and $0.63, respectively, in 2Q15.

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

Projections

Sonoco Products has projected EPS in the range of $0.65–$0.70 for 3Q16.

The company has made the following projections for 2016:

  • EPS in the range of $2.68–$2.74
  • an 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, visit Market Realist’s Consumer Discretionary page.

Advertisement

More From Market Realist