Sonoco Products Co.
), a global manufacturer of consumer and industrial packaging
products, reached a new 52-week high of $44.00 on Jun 24. Sonoco
has a market cap of $4.42 billion. Average volume of shares traded
over the last 3 months stood at approximately 428K.
The company has delivered a 1-year return of about 30.97%,
outperforming the S&P 500. Sonoco has long-term estimated
earnings per share growth rate of 6.93%.
What's Driving Sonoco Up?
Sonoco's shares have trended upward following its first-quarter
earnings release on Apr 17. Adjusted earnings per share for Sonoco
Products increased 4% to 50 cents in the quarter. A positive
price/cost relationship, modest productivity improvements and lower
pension and interest expenses helped offset lost production and
lower sales due to severe winter weather across the U.S. and
For full-year 2014, Sonoco reiterated its earnings per share
guidance range of $2.43 to $2.53. Free cash flow is anticipated to
be around $130 million for 2014. Sonoco expects second-quarter 2014
earnings per share in the range of 63-67 cents. Compared with 59
cents earned in the prior-year quarter, this reflects annual growth
of 7% to 14%.
After having a difficult run following the recession, the Display
and Packaging segment's sales and profit improved in 2013 and the
momentum has continued in the first quarter of 2014 as well. This
is driven by volume increases in both international contract
packaging and the U.S. display and packaging services. Furthermore,
the new contract from
Energizer Holdings Inc.
), awarded in April, also supported results.
The annual $20 million Energizer contract is a major win for
Sonoco, as it will leverage its segments in supplying e-packaging
materials and will also provide packaging services. Sonoco foresees
opportunity for other similar contract wins going forward.
Furthermore, the pickup in promotional activity at the customer
level signals an increased volume outlook for packaging goods.
The severe winter weather in January and February significantly
disrupted Sonoco's operations as well as its customers'. However,
with the weather improving, the company noted a significant rebound
in demand followed by a return to a more normal and expected level
of sales orders in March. Although overall volume was essentially
flat, second-quarter earnings benefited from a 50 basis point
increase in the company's overall gross margin due to a positive
On Jun 13, Sonoco's subsidiary, Sonoco-Alcore S.a.r.l., announced
that the German Federal Court of Justice has rejected an appeal
against the German portion of Sonoco's European Patent EP 1 071
556, thereby entirely reversing a decision of the Federal Patent
Court of Mar 1, 2011. The patent relates to the use of wide-ply
board technology in the production of cores for the paper industry
as used in Sonoco's M-Core Series.
Per the decision, which is final and cannot be appealed, the patent
is confirmed to have constantly been in force since it was granted
in 2002. In other countries, the validity of the European patent
has not been challenged to date. An opposition against the patent
before the European Patent Office had been rejected in 2009.
The combination of the wide-ply in-house manufactured coreboard and
Sonoco Alcore's proprietary manufacturing technique give the
M-Series Cores superior performance characteristics to meet the
rising demands of the paper industry.
Other Stocks to Consider
Sonoco currently retains a Zacks Rank #3 (Hold). Some better-ranked
stocks in the same sector include
Crown Holdings Inc.
Graphic Packaging Holding Company
), both of which hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
SONOCO PRODUCTS (SON): Free Stock Analysis
ENERGIZER HLDGS (ENR): Free Stock Analysis
CROWN HLDGS INC (CCK): Free Stock Analysis
GRAPHIC PKG HLD (GPK): Free Stock Analysis
To read this article on Zacks.com click here.