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Sonoco Has Announced a New Investment to Improve Performance

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Price movement

Sonoco Products (SON) has a market cap of $5.1 billion. It rose 0.85% to close at $50.93 per share on October 5, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.4%, -3.9%, and 27.6%, respectively, on the same day.

SON is trading 2.4% below its 20-day moving average, 1.4% below its 50-day moving average, and 9.5% above its 200-day moving average.

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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 11.9% on October 5.

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

  • WestRock Company (WRK) — $11.8 billion
  • AptarGroup (ATR) — $4.8 billion
  • Bemis Company (BMS) — $4.7 billion

Latest news on Sonoco Products

In a press release on October 5, 2016, Sonoco reported, “Sonoco [SON], one of the largest global diversified packaging companies, has made a significant investment in its high performance film core production equipment. The investment will enable Sonoco to provide enhanced quality cores for film markets where constantly increasing quality standards are so incredibly vital to the integrity of the film.”

The company’s release continued, “The high performance film markets serviced by these cores include medical films, optical films, window films, photovoltaic applications, battery separator films, packaging films, industrial films and more.”

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Performance in 2Q16

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

Sales from its Protective Solutions segment rose 2.8% from 2Q15 to 2Q16. The company’s gross profit margin rose 4.3%, and its income before interest and tax fell 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.

Sonoco’s cash and cash equivalents fell 41.0%, and its inventories rose 3.1% from 4Q15 to 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% compared to 2Q15.

Projections

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

  • EPS of $2.68–$2.74
  • effective tax rate of 31.5%
  • free cash flow of ~$140 million, reflecting an operating cash flow of $490 million

In the next part of this series, we’ll take a look at Nike (NKE).

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