On Sep 13, we reiterated our Neutral recommendation on
Sonoco Products Co.
), a global manufacturer of consumer and industrial packaging
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Sonoco's Consumer Packaging segment witnessed a turnaround in
volume of its composite can business for the first time since
second quarter 2011. Composite cans contribute almost half of the
segment's revenues and generate high margins. Addition of new
products, geographical expansion and increased promotional
activity could drive volume growth in the second half of 2013.
Moreover, Sonoco increased the prices of the composite cans in
the quarter, which should benefit the segment for the rest of the
Sonoco has been awarded a contract by
Energizer Holdings Inc.
) for primary packaging, retail display assembly and fulfillment
of a segment of battery products for Energizer brands. The scope
of work of this 3.5-year deal includes the supply of primary
packaging for 150 SKUs annually. This will boost the Display and
Packaging segment, which should also continue to benefit from new
Sonoco implemented a $40/ton increase in uncoated recycled
paperboard and a 5% increase in tubes and cores in the United
States and Canada, effective Jul 2013. This will help the company
to compensate for the rising recovered paper and other raw
On the flipside, pension expense is expected to be higher in 2013
than that of 2012. Sonoco plans to close the Carrickmacross
facility on Nov 1, 2013. The facility manufactures thermoformed
packages for Ireland and other parts of Europe. Sonoco's decision
is based on volume loss and weak profits, experienced by the
plant over the past several years, which may continue in 2013 as
well. Moreover, slow recovery in the U.S. and ongoing European
weakness remain headwinds for the company in fiscal 2013.
Other Stocks to Consider
Other players that are worth a mention in the industry are
Sealed Air Corporation
), carrying a Zacks Rank #1 (Strong Buy) and
) which retains a Zacks Rank #2 (Strong Buy).