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Why Sonoco Raised the Prices of Its Paperboard Tubes and Cores

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Price movement

Sonoco Products (SON) has a market cap of $5.4 billion. It rose 0.20% to close at $54.53 per share on January 13, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.98%, 2.0%, and 3.5%, respectively, on the same day.

SON is trading 1.5% above its 20-day moving average, 2.6% above its 50-day moving average, and 9.0% 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 YTD price movement of XMLV was 0.79% on January 13.

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

  • WestRock Company (WRK) — $13.1 billion
  • AptarGroup (ATR) — $4.6 billion
  • Bemis Company (BMS) — $4.6 billion

Latest news on SON

Sonoco Products is increasing the prices for all its paperboard tubes and cores by a minimum of 8% in the United States and Canada, effective starting on February 13, 2017.

According to James Harrell, Sonoco’s US and Canada Tubes and Cores segment’s corporate vice president, “This price adjustment is necessary to recover continuing cost increases in uncoated recycled paperboard, our primary raw material, combined with higher costs for energy, labor and other input costs.”

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Performance of Sonoco Products in 3Q16

Sonoco Products reported fiscal 3Q16 net sales of $1.21 billion, a fall of 2.7% from the $1.24 billion it reported in 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 3Q15 and 3Q16.

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

SON’s cash and cash equivalents and inventories fell 12.7% and 2.4%, respectively, between 4Q15 and 3Q16. It reported free cash flow of $85.2 million in 3Q16, a rise of 52.4% over 3Q15.

Projections

Sonoco Products has made the following projections for 4Q16:

  • GAAP (generally accepted accounting principles) EPS in the range of $0.95–$1.04
  • base EPS in the range of $0.60–$0.65

The company has made the following projections for fiscal 2016:

  • GAAP EPS in the range of $2.73–$2.82
  • base EPS in the range of $2.70–$2.75
  • cash from operations of ~$398 million

It’s also made the following projections for fiscal 2017:

  • base EPS in the range of $2.68–$2.78
  • cash from operations of ~$470 million
  • free cash flow of ~$126 million

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

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