On Jul 10, 2014, Zacks Investment Research upgraded the consumer
Sonoco Products Co.
) to a Zacks Rank #1 (Strong Buy) owing to decent first-quarter
2014 results and expected organic growth.
Why the Upgrade?
On Apr 17, Sonoco reported first quarter 2014 adjusted earnings of
52 cents per share, increasing 4% year over year and beating the
Zacks Consensus Estimate by a penny. A positive price/cost
relationship, modest productivity improvements and lower pension
and interest expenses helped offset lost production and sales due
to severe winter weather across the U.S. and Canada.
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%.
Sonoco received a new contract from
Energizer Holdings Inc.
) in April. The annual $20 million Energizer contract will leverage
Sonoco's segments in supplying e-packaging materials and will also
provide packaging services. Furthermore, the pickup in promotional
activity at the customer level signals an increased volume outlook
for packaging goods.
In addition, Sonoco is investing $20 million to build a new
composite can plant in Malaysia, and $5 million in a new product
development center in South Carolina. These projects will help
drive organic growth over the medium-to-long term.
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. 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
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. 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.
These bullish factors led to an upward estimate revision in recent
times. Over the last 90 days, the Zacks Consensus Estimate for 2014
increased 0.4% to $2.50 per share and for 2015, the same increased
0.7% to $2.71 per share.
Other Stocks to Consider
Some other stocks in the same sector that warrant a look include
Graphic Packaging Holding Co.
). Both of these stocks carry a Zacks Rank #2 (Buy).
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SONOCO PRODUCTS (SON): Free Stock Analysis
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