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Sonoco Sells Rigid Plastics Blow Molding Operations to Amcor

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Price movement

Sonoco Products (SON) has a market cap of $5.1 billion. It rose 1.3% to close at $50.55 per share on November 7, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.52%, -0.34%, and 26.6%, respectively, on the same day. SON is trading 0.50% above its 20-day moving average, 1.5% below its 50-day moving average, and 5.6% 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 12.0% on November 7. The market caps of Sonoco Products’ competitors are as follows:

  • WestRock (WRK) — $11.4 billion
  • AptarGroup (ATR) — $4.7 billion
  • Bemis (BMS) — $4.5 billion

Latest news on Sonoco Products

In a press release on November 7, 2016, Sonoco Products reported that “it has completed the sale of its rigid plastics blow molding operations to Amcor, a global leader of rigid and flexible packaging products, for $280 million.”

It added that “Sonoco’s rigid plastics blow molding operations include seven manufacturing facilities in the U.S. and Canada with 850 employees producing containers serving the personal care and food and beverage markets. The disposition of these operations is expected to impact annual sales by approximately $205 million.”

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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% from the $1.24 billion reported in fiscal 3Q15. The company’s gross profit margin and EBIT (earnings before interest and tax) margin expanded 100 basis points and 230 basis points, respectively, between fiscal 3Q15 and fiscal 3Q16. Its net income and EPS (earnings per share) rose to $65.4 million and $0.64, respectively, in fiscal 3Q16, compared with $43.9 million and $0.43 in fiscal 3Q15.

SON’s cash and cash equivalents and inventories fell 12.7% and 2.4%, respectively, between fiscal 4Q15 and fiscal 3Q16. Its current ratio rose to 1.7x, and its long-term debt-to-equity ratio fell to 0.65x in fiscal 3Q16, compared with 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% over 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

Next, we’ll discuss Colgate-Palmolive (CL).

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