Yahoo Finance Why Is Sonoco (SON) Down 4.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Sonoco (SON). Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sonoco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sonoco Earnings Beat Estimates in Q4, Revenues Lag
Sonoco Products Company reported adjusted earnings per share of $1.27 in the fourth quarter of 2022, beating the Zacks Consensus Estimate of $1.26. The figure came within the company’s guidance of $1.20-$1.30. The bottom line improved 28% from the prior-year quarter’s levels, driven by strong strategic pricing performance across most of its businesses.
Including one-time items, the company reported earnings of 98 cents, which compared favorably with the year-ago quarter’s 66 cents.
Sonoco’s net sales were $1,676 million, missing the Zacks Consensus Estimate of $1,799 million. The top line jumped 16.5% year over year, courtesy of strong pricing performance and sustained robust results from the Metal Packaging acquisition. However, the negative impact of foreign currency translation and lower industrial volumes somewhat negated the gains.
Operational Update
The cost of sales was $1,362 million, 15.8% higher than the year-earlier quarter. Gross profit in the reported quarter totaled $314 million compared with the prior-year quarter’s $263 264 million. Gross margin came in at 18.7% compared with the year-ago quarter’s 18.3%.
Selling, general and administrative expenses amounted to $173 million, up 12.3% year over year. Adjusted operating income was $184 million compared with the prior-year quarter’s $137 million.
Segment Performance
The Consumer Packaging segment’s net sales were up 49.2% year over year to $879 million due to the addition of the Metal Packaging acquisition and pricing performance. Operating profit amounted to $85 million, up 37.1% from the prior-year quarter’s levels, primarily owing to earnings added by Metal Packaging, solid price/cost performance and favorable productivity.
Net sales in the Industrial Paper Packaging segment were $597 million, reflecting a year-over-year decrease of 8.9% due to lower demand. Operating profit totaled $79 million, reflecting a 33.9% year-over-year improvement due to strategic pricing actions that helped offset the impact of lower volume/mix.
Sales for the All Other segment, which comprises protective, healthcare, retail and industrial plastics units, rose 2.6% to $200 million. Operating profit for the segment totaled $20 million compared with the year-ago quarter’s $16 million.
Financial Performance
Sonoco reported cash and cash equivalents of $227 million at the end of Dec 31, 2022, compared with $171 million at the end of Dec 31, 2021. The company generated cash flow from operating activities of $509 million for full-year 2022 compared with $299 million in 2021.
As of Dec 31, 2022, total debt was $3.22 billion compared with $1.61 billion as of Dec 31, 2021, primarily due to financing transactions used to fund the Metal Packaging acquisition in January 2022.
2022 Performance
Sonoco reported adjusted earnings per share (EPS) of $6.48 in 2022 compared with $3.93 reported in the prior year. The bottom line surpassed the Zacks Consensus Estimate of $6.46. Including one-time items, the company reported earnings of $4.72 per share against a loss of 86 cents in 2021.
Sales were up 29.7% year over year to $7.25 billion. The top line missed the Zacks Consensus Estimate of $7.37 billion.
Guidance
Sonoco projects first-quarter 2023 adjusted EPS between $1.15 and $1.25.
For 2023, the company expects an adjusted EPS of $5.70-$5.90. Operating cash flow for the year is expected in the range of $925-$ million to $975 million, and free cash flow is projected between $550 million and $650 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -13.87% due to these changes.
VGM Scores
Currently, Sonoco has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Sonoco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Sonoco Products Company (SON) : Free Stock Analysis Report
