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Sonoco Products Announces New Acquisition to Expand Its Business

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Price movement

Sonoco Products (SON) has a market cap of $5.0 billion. It rose 0.20% to close at $49.86 per share on November 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.28%, -1.3%, and 24.9%, respectively, on the same day. SON is trading 1.2% below its 20-day moving average, 3.1% below its 50-day moving average, and 4.6% above its 200-day moving average.

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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 10.1% on November 2.

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

  • WestRock Company (WRK): $11.5 billion
  • AptarGroup (ATR): $4.5 billion
  • Bemis Company (BMS): $4.6 billion

Latest news on Sonoco Products

In a press release on November 2, 2016, Sonoco Products reported, “Sonoco (SON), one of the largest diversified global packaging companies, has acquired Plastic Packaging (PPI), a privately held Hickory, N.C.-based flexible packaging company.”

It added, “Through the acquisition, Sonoco gains additional lamination, wide and narrow web flexographic printing, and pouch and bag forming capabilities that will allow Sonoco to better serve its current customers while expanding its customer base.”

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Performance of Sonoco Products in fiscal 3Q16

Sonoco Products reported fiscal 3Q16 net sales of $1.21 billion, a fall of 2.7% compared to $1.24 billion in fiscal 3Q15. Sales from its consumer packaging, display and packaging, and paper and industrial converted products segments fell 0.35%, 19.0%, and 0.75%, respectively. Sales from its protective solutions segment rose 1.5% in fiscal 3Q16 compared to fiscal 3Q15.

The company’s gross profit margin and EBIT (earnings before interest and tax) margin rose 100 basis points and 230 basis points, respectively, in fiscal 3Q16 compared to the prior-year period.

Its net income and EPS (earnings per share) rose to $65.4 million and $0.64, respectively, in fiscal 3Q16 compared to $43.9 million and $0.43, respectively, in fiscal 3Q15.

SON’s cash and cash equivalents and inventories fell 12.7% and 2.4%, respectively, in fiscal 3Q16 compared to fiscal 4Q15. Its current ratio rose to 1.7x, and its long-term debt-to-equity ratio fell to 0.65x in fiscal 3Q16 compared to 1.4x and 0.66x, respectively, in fiscal 4Q15. It reported free cash flow of $85.2 million in fiscal 3Q16, a rise of 52.4% compared to fiscal 3Q15.

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Quarterly dividend

Sonoco Products has declared a regular quarterly dividend of $0.37 per share on its common stock. The dividend is payable on December 9, 2016, to shareholders of record as of November 11, 2016.

Projections

Sonoco Products has projected EPS of $0.60–$0.65 for 4Q16. The company made the following projections for 2016:

  • EPS of $2.70–$2.75
  • an effective tax rate of 31.0%
  • free cash flow of ~$140.0 million

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

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