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Sonoco (SON) to Report Q2 Earnings: What's in the Offing?

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Zacks Equity Research
·5-min read
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Sonoco Products Company SON is set to release second-quarter 2020 results on Jul 16, before the bell.

A Sneak Peek into Q1 Results

The company reported mixed results in the first quarter. Earnings beat the Zacks Consensus Estimate and improved year over year. The top line, however, missed the consensus mark and declined year on year.

Which Way are Estimates Treading?

The Zacks Consensus Estimate for Sonoco’s to-be-reported quarter’s earnings is currently pegged at 78 cents, suggesting a decline of 17.9% from the prior-year quarter. The Zacks Consensus Estimate for total sales of $1.3 billion indicates a 3.4% year-over-year fall.

The Zacks Consensus Estimate for the June-end quarter’s earnings remained unchanged over the past 30 days.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Sonoco’s Consumer Packaging segment is expected to have benefited in the second quarter, as approximately 80% of the segment’s sales comes in from food packaging where the company is witnessing increased orders from stay-at-home consumers. The Zacks Consensus Estimate for the segment’s quarterly net sales is pegged at $631 million, suggesting an increase of 4.6% from the prior-year period. The Zacks Consensus Estimate for the segment’s operating profit is $69 million, indicating year-on-year growth of 9.5%.

The Zacks Consensus Estimate for the Paper and Industrial Converted Products segment’s sales is pinned at $463 million for the to-be-reported quarter, suggesting a year-on-year decline of 5.7%. The Zacks Consensus Estimate for the segment’s operating income is $41.5 million, calling for a year-on-year plunge of 32%. Higher Old Corrugated Containers (OCC) prices might have negatively impacted the industrial segments earnings in the quarter, while elevated recycled fiber prices might have hurt the paper-based businesses. Nevertheless, increased demand for tissue and towel market are likely to have benefited Sonoco’s North American paperboard operations during the quarter.

The company’s Protective Solutions segment is likely to have been affected by lower demand in molded foam and consumer fiber businesses in the to-be-reported quarter. The Zacks Consensus Estimate for the segment’s revenues is pegged at $109 million for the June-end quarter, indicating a fall of 16.8% from the prior-year period. The Zacks Consensus Estimate for the segment’s operating profit is $8.1 million, indicating a year-on-year plunge of 43%. However, the segment is likely to have gained from the ThermoSafe temperature-assured packaging business in the quarter on increasing demand for supplying coolers, which is essential for virus testing and pharmaceutical transport.

The Zacks Consensus Estimate for the Display and Packaging segment’s revenues is currently pegged at $121 million, suggesting a 10.4% decline year over year. The Zacks Consensus Estimate for the segment’s operating profit is $4.2 million, indicating a fall of 28.9% from the year-earlier quarter.

Weak demand on account of unfavorable impact of the coronavirus outbreak on certain parts of the company’s business might have marred its quarterly performance. Moreover, a negative impact of price/cost relationship, due to higher recycled fiber costs, and unfavorable impact from a strong U.S. dollar are expected to have impacted Sonoco’s bottom-line performance in the quarter. However, the company’s focus on optimizing businesses through process improvement, standardization and cost reductions efforts are likely to have aided the company’s margins during the April-June quarter.

Sonoco Products Company Price and EPS Surprise

Sonoco Products Company Price and EPS Surprise
Sonoco Products Company Price and EPS Surprise

Sonoco Products Company price-eps-surprise | Sonoco Products Company Quote

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Sonoco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Sonoco has an Earnings ESP of 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Price Performance

In a year’s time, shares of Sonoco have lost 20.1% compared with the industry’s 7.7% decline.



Stocks to Consider

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

AGCO Corporation AGCO has an Earnings ESP of +449.9% and sports a Zacks Rank of 1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.W. Grainger, Inc. GWW currently carries a Zacks Rank #2 and has an Earnings ESP of +9.27%.

Lincoln Electric Holdings, Inc. LECO, another Zacks #2 Ranked stock, has an Earnings ESP of +7.89%.

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