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Category: Stock Market and Sonoco
Date: 21 October 2019 Stock Price: $58.01 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Sonoco a company providing packaging solutions to the consumer and industrial markets.
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About Sonoco Products
In business for nearly 120 years, Sonoco’s diversified portfolio of consumer and industrial packaging, provides built-in diversification for investors all within one company. Serving a range of markets across a number of industries and global geographies, Sonoco is keenly focused on returning value to shareholders and has done so through stock performance and dividends for more than 360 consecutive quarters.
Overview of Sonoco's latest earnings report
Data below refers to quarterly data unless specified otherwise:
- Revenues: $1.353 billion (down from $1.364 billion for the same period of the previous year)
- Revenues decreased by -0.86% over the last 12 months
- Cost of sales: $1.088 billion (down from $1.105 billion for the same period of the previous year)
- Cost of sales decreased by -1.54% over the last 12 months
- Net earnings: $92.064 million (up from $72.415 million for the same period of the previous year)
- Diluted earnings per share: $0.91 (up from $0.72 for the same period of the previous year)
- PE ratio: 15.9
- Dividend declared: $0.43
- Dividend yield: 2.96%
- Diluted weighted-average shares outstanding: 101.186 million (up from 101.040 million for the same period of the previous year)
- Cash and cash equivalents: $115.853 million
- Cash and cash equivalents per share: $1.14
- Cash and cash equivalents makes up 1.97% of Sonoco's market capital
- Cash and cash equivalents makes up 2.32% of Sonoco's total assets
- Accounts receivable: $773.490 million
- Accounts receivable makes up 15.5% of Sonoco's total assets
- Inventories: $497.634 million
- Inventories makes up 9.98% of Sonoco's total assets
- Stockholders equity in Sonoco': $1.854 billion
- Stockholders equity per share: $18.32
- So Sonoco is trading a 3.16 times its stockholders equity which is within the expected range of between 2 and 4 which most firms ten to trade at.
- Cash generated from operations (for the 9 months): $238.818 million
- Cash generated from operations per share (for the 9 months): $2.36
Sonoco's management commentary on the results
HARTSVILLE, S.C., Oct. 17, 2019 (GLOBE NEWSWIRE) -- Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its third quarter ending September 29, 2019.
Commenting on the Company’s third-quarter GAAP and base earnings performance, Rob Tiede, President and Chief Executive Officer, said, "Our strong mix of consumer- and industrial-related packaging businesses did an excellent job navigating slumping global macroeconomic conditions. By focusing our businesses on the areas which we can control, we continued to drive margin expansion as each of our four business segments reported gains in operating profit as compared to last year. With these strong operating results, which included the Corenso acquisition, and a lower effective tax rate, we delivered our best third quarter earnings performance and exceeded the high end of our guidance.
"Overall in the third quarter, net sales declined slightly while GAAP net income attributable to Sonoco improved approximately 27 percent, and base net income gained 12.5 percent to a record $98.1 million as productivity improvements, earnings from acquisitions and a favorable effective tax rate more than offset lower volume/mix and a negative price/cost relationship. GAAP gross profit margin was a solid 19.6 percent, up 58 basis points from last year's quarter. GAAP operating profit improved 36 percent from last year due to improved margins, and lower restructuring and other costs. Base operating profit increased 12.1 percent to $139.1 million, while base operating profit margin increased approximately 120 basis points from last year.
“Our Consumer Packaging segment reported a 3.1 percent decline in sales and a slight improvement in operating profit compared to last year's quarter, however, operating margin improved approximately 45 basis points to 9.8 percent. Sales in our Paper and Industrial Converted Products segment were up 6.9 percent, while operating profit grew 10 percent and operating margin rose 36 basis points to 12 percent. The turnaround in our Display and Packaging segment continued during the quarter with operating margin expanding 390 basis points over the prior-year period, and in our Protective Solutions segment operating profit improved 34.0 percent and operating margin expanded by 293 basis points.”
Fourth Quarter and Full-Year Guidance Update
Note: Fourth-quarter and full-year 2019 GAAP guidance are not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related impairment charges, acquisition-related costs, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company's future GAAP financial results.
Commenting on the Company’s third-quarter GAAP and base earnings performance, Rob Tiede, President and Chief Executive Officer, said, "Our strong mix of consumer- and industrial-related packaging businesses did an excellent job navigating slumping global macroeconomic conditions. By focusing our businesses on the areas which we can control, we continued to drive margin expansion as each of our four business segments reported gains in operating profit as compared to last year. With these strong operating results, which included the Corenso acquisition, and a lower effective tax rate, we delivered our best third quarter earnings performance and exceeded the high end of our guidance.
"Overall in the third quarter, net sales declined slightly while GAAP net income attributable to Sonoco improved approximately 27 percent, and base net income gained 12.5 percent to a record $98.1 million as productivity improvements, earnings from acquisitions and a favorable effective tax rate more than offset lower volume/mix and a negative price/cost relationship. GAAP gross profit margin was a solid 19.6 percent, up 58 basis points from last year's quarter. GAAP operating profit improved 36 percent from last year due to improved margins, and lower restructuring and other costs. Base operating profit increased 12.1 percent to $139.1 million, while base operating profit margin increased approximately 120 basis points from last year.
“Our Consumer Packaging segment reported a 3.1 percent decline in sales and a slight improvement in operating profit compared to last year's quarter, however, operating margin improved approximately 45 basis points to 9.8 percent. Sales in our Paper and Industrial Converted Products segment were up 6.9 percent, while operating profit grew 10 percent and operating margin rose 36 basis points to 12 percent. The turnaround in our Display and Packaging segment continued during the quarter with operating margin expanding 390 basis points over the prior-year period, and in our Protective Solutions segment operating profit improved 34.0 percent and operating margin expanded by 293 basis points.”
Fourth Quarter and Full-Year Guidance Update
- Base earnings for the fourth quarter of 2019 are estimated to be in the range of $0.72 to $0.76 per diluted share, compared to $0.84 per diluted share in the fourth quarter of 2018. The guidance reflects a more normal effective tax rate in the fourth quarter of 2019 compared to last year's unusually low fourth-quarter effective tax rate which was driven by one-time benefits from the Tax Cuts and Job Act. Additionally, the Company anticipates a more pronounced year-end slowdown in customer orders in certain served markets. Finally, 2018 included the receipt of significant insurance proceeds in the fourth quarter that is not expected to repeat in 2019.
- Full-year 2019 base earnings guidance has been narrowed to $3.50 to $3.54 per diluted share. Base earnings for 2018 were $3.37 per diluted share.
- Full-year 2019 operating cash flow guidance remains in a range of $435 million to $455 million, which reflects the impact of the Company's voluntary contributions to its U.S. defined benefit pension plans. The Company's free cash flow guidance remains in the range of $60 million to $80 million.
Note: Fourth-quarter and full-year 2019 GAAP guidance are not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related impairment charges, acquisition-related costs, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company's future GAAP financial results.
Sonoco Products (NYSE: SON) stock price history
The image below, obtained from Google, shows the stock price history of Sonoco Products over the last 5 years. And it's been a pretty good time for Sonoco Products stockholders. 5 years ago the stock was trading at around $40.8 a stock and its currently trading at $58.91 a stock. That's a decent return of 42.1% provided to Sonoco Products stockholders over the last 5 years. The opportunity cost of holding Sonoco Products which only returned 42.1% over the last 5 years compared to a stock like Netflix that returned over 300% for the same time period becomes very significant.
The stock of Sonoco Products is trading at close to the midpoint between its 52 week low and its 52 week high, which to us is an indication that the short term sentiment and momentum of Sonoco Products' stock is neutral.
The stock of Sonoco Products is trading at close to the midpoint between its 52 week low and its 52 week high, which to us is an indication that the short term sentiment and momentum of Sonoco Products' stock is neutral.
Recent coverage of Sonoco Products
The extract below covers the latest news regarding Sonoco as obtained from Zacks.com
Sonoco (SON - Free Report) came out with quarterly earnings of $0.97 per share, beating the Zacks Consensus Estimate of $0.91 per share. This compares to earnings of $0.86 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 6.59%. A quarter ago, it was expected that this packaging maker would post earnings of $0.97 per share when it actually produced earnings of $0.95, delivering a surprise of -2.06%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Sonoco, which belongs to the Zacks Containers - Paper and Packaging industry, posted revenues of $1.35 billion for the quarter ended September 2019, missing the Zacks Consensus Estimate by 1.87%. This compares to year-ago revenues of $1.36 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Sonoco shares have added about 9.7% since the beginning of the year versus the S&P 500's gain of 19.3%.
Read the full article here
Sonoco (SON - Free Report) came out with quarterly earnings of $0.97 per share, beating the Zacks Consensus Estimate of $0.91 per share. This compares to earnings of $0.86 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 6.59%. A quarter ago, it was expected that this packaging maker would post earnings of $0.97 per share when it actually produced earnings of $0.95, delivering a surprise of -2.06%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Sonoco, which belongs to the Zacks Containers - Paper and Packaging industry, posted revenues of $1.35 billion for the quarter ended September 2019, missing the Zacks Consensus Estimate by 1.87%. This compares to year-ago revenues of $1.36 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Sonoco shares have added about 9.7% since the beginning of the year versus the S&P 500's gain of 19.3%.
Read the full article here
Sonoco (NYSE: SON) latest stock valuation
So what is Sonoco stock worth based on the release of their latest earnings report and their fiscal guidance provided? Based on Sonoco's latest earnings report and their outlook our valuation models provide a target (full value) price of Sonoco's stock at $56.70 a stock (up slightly from our 2nd quarter 2019 earnings report valuation for Sonoco). Therefore we believe the stock of Sonoco is slightly overvalued at its current price of $58.01.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $56.70, so a good entry point into Sonoco's stock would be at $51 or below. We expect that the stock of Sonoco will pull back slightly in coming weeks and months to levels closer to our target (full value) price.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $56.70, so a good entry point into Sonoco's stock would be at $51 or below. We expect that the stock of Sonoco will pull back slightly in coming weeks and months to levels closer to our target (full value) price.
Sonoco Products next earnings report
It is expected that Sonoco Products will release their 4th quarter and full fiscal 2019 earnings report in late January 2019