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Sonoco Products Co. (SON - Free Report) provided its financial outlook for 2017 and reaffirmed the same for 2016. Further, the company outlined its strategic priorities up to 2017.
Guidance Maintained
Sonoco reaffirmed its fourth-quarter 2016 and full-year earnings per share guidance in the range of 60–65 cents that was provided during the third-quarter earnings release. Compared to the earnings of 64 cents in the year-ago quarter, the midpoint of the guidance range reflects a year-over-year decline of 2%.
The 2016 earnings guidance was maintained at $2.70 to $2.75, reflecting a projected increase of 8% to 10% from $2.51 per share earned in the prior year. The company anticipates delivering a record earnings performance in the year, notwithstanding flat to negative growth from many of its largest customers and generally difficult macroeconomic conditions. In the first three quarters, Sonoco has delivered a 12.3% increase in earnings driven by an expansion of 101 basis points (bps) in gross margins and growth of 100 bps in operating margins on a year-over-year basis. Operating profits for each of the four business segments have improved, particularly the Consumer Packaging segment.
Issues 2017 EPS Guidance
For 2017, Sonoco projects earnings per share in the range of $2.68 to $2.78. The midpoint of $2.73 is based on an assumption of 4% or 12 cents per share improvement in earnings from the company’s base operations. This will be driven by volume growth, net of higher depreciation associated with growth initiatives, while productivity is projected to offset non-material inflation costs. Further, it includes a net impact of 8 cents per share from recently completed divestitures and acquisitions. Additionally, higher taxes, pension expense and the impact of a stronger dollar will negatively impact earnings by 6 cents per share. However, lower interest expense and a reduced share count will counter the negative impact by 3 cents per share.
Sonoco added that it will continue to utilize its free cash flow and cash proceeds to pursue strategic acquisitions. If acquisitions do not materialize, the proceeds will be used instead to repurchase shares. This would have a positive impact of 10 cents per share, raising the earnings guidance to the range of $2.78 to $2.88.
Updates on Cash Flow Forecasts
For 2016, cash flow from operation is projected to be around $398 million, including estimated cash tax payments and fees of $81 million related to the sale of its blow molding plastics operations in Nov 2016. Capital expenditure is projected at $190 million and the company will pay out $147 million as dividends. Consequently, free cash flow will be $61 million. Excluding $81 million in cash tax payments and fees, Sonoco’s free cash flow is anticipated to be in line with its previous target of approximately $140 million. Proceeds from divestitures, net of acquisitions will be around $189 million.
During 2016, Sonoco repurchased $100 million of its common stock and has completed acquisitions in flexible packaging and Protective Solutions, while reducing its debt levels. Sonoco plans to end the year with a net debt to EBITDA ratio of 1.3 times.
For 2017, Sonoco is anticipating cash from operations to be around $470 million and free cash flow to be about $126 million. Capital expenditure for the year will be around $190 million. Free cash flow will be lower in 2017 due to increased pension contributions, higher cash taxes and the company’s normal trend of hiking its dividend.
Sonoco provided an update on its systematic approach to drive market-focused growth – i6 Innovation Process. The company recently opened a new $12 million iPS Studio on its Hartsville, SC campus to work directly with its customers on new innovative packaging. The company is allocating approximately $50 million in new product innovations in 2017, coming from direct customer engagements at the Studio.
Moreover, Sonoco announced the store launch of a TruVue can, a new ground-breaking substitute for traditional metal cans. TruVue uses Sonoco’s patented Freshlock technology. It is made of a highly engineered, multilayer plastics substrate which enables consumers to view inside of the product. Sonoco is working with a leading South Carolina-based food canner to launch seven SKUs of its Glory brand beans in about 400 retail grocery stores in the Southeast U.S.
Sonoco announced that it will invest $20 million in a new packaging center that will support Duracell’s new North America battery packaging operation. Annual sales of packaging and services over the five-year contract period are expected to be more than $50 million. Sonoco will install and operate state-of-the-art primary packaging equipment at the new center and provide all packaging materials. Sonoco’s Display and Packaging unit will be located in Duracell’s new leased facility in the Atlanta area and it will produce retail merchandising displays which will also be packed out at the same facility. Full production is expected in fourth-quarter 2018.
Remains Committed to Drive Growth
Its 2017 capital deployment strategy is planned to be weighted toward investments to grow its existing businesses while looking to make targeted acquisitions. The company has a long tradition of returning substantial amounts of cash to shareholders in the form of dividends and share repurchase. In the past few years, the company has improved the baseline performance of its key businesses, solidified its global position in composite cans and divested non-core assets. Moreover, the company continues to reduce its debt levels along with strengthening its balance sheet and has made several acquisitions in key focus areas. This has helped Sonoco optimize its portfolio to more of a consumer and protective packaging company and create a more consistent earnings stream for years to come.
South Carolina-based Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. The company is also the largest producer of paper-based tubes and cores in North America.
Zacks Rank
Sonoco currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include ACCO Brands Corporation (ACCO - Free Report) , Berry Plastics Group, Inc. (BERY - Free Report) and Greif, Inc. (GEF - Free Report) .
ACCO Brands Corporation has an impressive track record of earnings surprise with an average positive earnings surprise of 23.93% in the last four quarters and sports a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Berry Plastics, which carries a Zacks Rank #2 (Buy) has an average positive earnings surprise of 17.13% in the last four quarters. Greif also carries a Zacks Rank #2 and has delivered a positive average earnings surprise of 21.29% in the last four quarters.
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Sonoco (SON) Provides 2017 Guidance, Reaffirms 2016 View
Sonoco Products Co. (SON - Free Report) provided its financial outlook for 2017 and reaffirmed the same for 2016. Further, the company outlined its strategic priorities up to 2017.
Guidance Maintained
Sonoco reaffirmed its fourth-quarter 2016 and full-year earnings per share guidance in the range of 60–65 cents that was provided during the third-quarter earnings release. Compared to the earnings of 64 cents in the year-ago quarter, the midpoint of the guidance range reflects a year-over-year decline of 2%.
The 2016 earnings guidance was maintained at $2.70 to $2.75, reflecting a projected increase of 8% to 10% from $2.51 per share earned in the prior year. The company anticipates delivering a record earnings performance in the year, notwithstanding flat to negative growth from many of its largest customers and generally difficult macroeconomic conditions. In the first three quarters, Sonoco has delivered a 12.3% increase in earnings driven by an expansion of 101 basis points (bps) in gross margins and growth of 100 bps in operating margins on a year-over-year basis. Operating profits for each of the four business segments have improved, particularly the Consumer Packaging segment.
Issues 2017 EPS Guidance
For 2017, Sonoco projects earnings per share in the range of $2.68 to $2.78. The midpoint of $2.73 is based on an assumption of 4% or 12 cents per share improvement in earnings from the company’s base operations. This will be driven by volume growth, net of higher depreciation associated with growth initiatives, while productivity is projected to offset non-material inflation costs. Further, it includes a net impact of 8 cents per share from recently completed divestitures and acquisitions. Additionally, higher taxes, pension expense and the impact of a stronger dollar will negatively impact earnings by 6 cents per share. However, lower interest expense and a reduced share count will counter the negative impact by 3 cents per share.
Sonoco added that it will continue to utilize its free cash flow and cash proceeds to pursue strategic acquisitions. If acquisitions do not materialize, the proceeds will be used instead to repurchase shares. This would have a positive impact of 10 cents per share, raising the earnings guidance to the range of $2.78 to $2.88.
Updates on Cash Flow Forecasts
For 2016, cash flow from operation is projected to be around $398 million, including estimated cash tax payments and fees of $81 million related to the sale of its blow molding plastics operations in Nov 2016. Capital expenditure is projected at $190 million and the company will pay out $147 million as dividends. Consequently, free cash flow will be $61 million. Excluding $81 million in cash tax payments and fees, Sonoco’s free cash flow is anticipated to be in line with its previous target of approximately $140 million. Proceeds from divestitures, net of acquisitions will be around $189 million.
During 2016, Sonoco repurchased $100 million of its common stock and has completed acquisitions in flexible packaging and Protective Solutions, while reducing its debt levels. Sonoco plans to end the year with a net debt to EBITDA ratio of 1.3 times.
For 2017, Sonoco is anticipating cash from operations to be around $470 million and free cash flow to be about $126 million. Capital expenditure for the year will be around $190 million. Free cash flow will be lower in 2017 due to increased pension contributions, higher cash taxes and the company’s normal trend of hiking its dividend.
SONOCO PRODUCTS Price
SONOCO PRODUCTS Price | SONOCO PRODUCTS Quote
Innovation is the Key to Success
Sonoco provided an update on its systematic approach to drive market-focused growth – i6 Innovation Process. The company recently opened a new $12 million iPS Studio on its Hartsville, SC campus to work directly with its customers on new innovative packaging. The company is allocating approximately $50 million in new product innovations in 2017, coming from direct customer engagements at the Studio.
Moreover, Sonoco announced the store launch of a TruVue can, a new ground-breaking substitute for traditional metal cans. TruVue uses Sonoco’s patented Freshlock technology. It is made of a highly engineered, multilayer plastics substrate which enables consumers to view inside of the product. Sonoco is working with a leading South Carolina-based food canner to launch seven SKUs of its Glory brand beans in about 400 retail grocery stores in the Southeast U.S.
Sonoco announced that it will invest $20 million in a new packaging center that will support Duracell’s new North America battery packaging operation. Annual sales of packaging and services over the five-year contract period are expected to be more than $50 million. Sonoco will install and operate state-of-the-art primary packaging equipment at the new center and provide all packaging materials. Sonoco’s Display and Packaging unit will be located in Duracell’s new leased facility in the Atlanta area and it will produce retail merchandising displays which will also be packed out at the same facility. Full production is expected in fourth-quarter 2018.
Remains Committed to Drive Growth
Its 2017 capital deployment strategy is planned to be weighted toward investments to grow its existing businesses while looking to make targeted acquisitions. The company has a long tradition of returning substantial amounts of cash to shareholders in the form of dividends and share repurchase. In the past few years, the company has improved the baseline performance of its key businesses, solidified its global position in composite cans and divested non-core assets. Moreover, the company continues to reduce its debt levels along with strengthening its balance sheet and has made several acquisitions in key focus areas. This has helped Sonoco optimize its portfolio to more of a consumer and protective packaging company and create a more consistent earnings stream for years to come.
South Carolina-based Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. The company is also the largest producer of paper-based tubes and cores in North America.
Zacks Rank
Sonoco currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include ACCO Brands Corporation (ACCO - Free Report) , Berry Plastics Group, Inc. (BERY - Free Report) and Greif, Inc. (GEF - Free Report) .
ACCO Brands Corporation has an impressive track record of earnings surprise with an average positive earnings surprise of 23.93% in the last four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Berry Plastics, which carries a Zacks Rank #2 (Buy) has an average positive earnings surprise of 17.13% in the last four quarters. Greif also carries a Zacks Rank #2 and has delivered a positive average earnings surprise of 21.29% in the last four quarters.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>