Sonoco Hikes Prices to Combat Rise in Raw Material Costs

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Consumer packaging company, Sonoco Products CompanySON has announced a price hike of 10% on all expanded polystyrene (EPS) parts and components, and a 7% increase on all Sonopost products. The price hike will be effective on all shipments after Mar 1.

The price rise is a result of the inflationary environment for multiple raw materials used by the Protective Solutions business of Sonoco. This move will enable Sonoco to continue providing high-quality, value-adding products to customers.

The cost of polystyrene, which is the key raw material in Sonoco's EPS products, is significantly affected by the raised prices of the Styrene monomer. Styrene is the precursor to polystyrene and several copolymers.

Sonoco Products Company Price

Sonoco Products Company Price | Sonoco Products Company Quote

Further, the price of OCC (old corrugated containers) has increased in each of the past five months due to high export demand and strong demand from the U.S. mills. OCC is being utilized by Sonoco's Sonopost product offerings.

An increase in costs can adversely affect Sonoco's business and financial results; while the ability to pass them on to customers by raising prices will improve productivity. The company also uses derivatives to mitigate some of the effect of raw material and energy cost fluctuations.

For first-quarter 2017, Sonoco projects earnings per share in the range of 55-63 cents. This guidance takes into consideration price/cost headwinds from rising raw material costs as well as the sale of the blowmolding operations.

Moreover, shares of Sonoco have outperformed the Zacks categorized Containers-Paper/Plastic industry in the past one year. The stock gained 30.7%, more than the industry's gain of 30.2%, over the same time frame.

Zacks Rank & Key Picks

Sonoco currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same sector include Kennametal Inc. KMT , Milacron Holdings Corp. MCRN and Apogee Enterprises, Inc. APOG .

Kennametal has delivered an average positive earnings surprise of 9.90% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Milacron also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 5.66% in the trailing four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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