Active Stock Evaluation: Sonoco Products Company (NYSE: SON)

Elizabeth Villa

I am Elizabeth Villa and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets.

I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

Address: 4211 Angie Drive, Los Angeles, CA 90017, USA
Phone: (+1) 714-933-4836
Email: elizabeth.villa@up24news.com
Elizabeth Villa

HARTSVILLE, S.C., July 13, 2019 – Shares of Sonoco Products Company (NYSE: SON) gained 0.49% to $65.16. The stock grabbed the investor’s attention and traded 486.932K shares as compared to its average daily volume of 408.76K shares. The stock’s institutional ownership stands at 77.00%.

Sonoco Products Co. (SON) reported first-quarter earnings of $73.70M. The Hartsville, South Carolina-based Company said it had net income of 73 cents per share. Earnings, adjusted for restructuring costs and non-recurring costs, were 85 cents per share. The results exceeded Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 80 cents per share.

First Quarter Review:

Net sales for the first quarter were $1.350B, a boost of $47.50M, or 3.6 percent, from last year’s first quarter. The improvement reflects sales added by acquisitions and higher selling prices. Foreign exchange rate declines negatively influenced first quarter sales by about $380M.

GAAP net income attributable to Sonoco in the first quarter was $73.70M, or $0.73 per diluted share, a decrease of $0.40M, contrast with $74.10M, or $0.73 per diluted share, in 2018. First-quarter GAAP earnings included after-tax non-base charges totaling $12.50M, $8.00M of which were after-tax charges related to restructuring activities. The remaining $4.50M related almost exclusively to non-operating pension costs. In the first quarter of 2018, GAAP earnings included $0.40M of after-tax non-base net charges, as after-tax restructuring charges of $2.40M were mostly offset by a tax benefit from the U. S. Tax Cuts and Jobs Acts of 2017 of $2.00M.  Adjusted for these items, base earnings in the first quarter of 2019 were $86.20M, or $0.85 per diluted share, a boost of $11.80M, contrast with $74.40M, or $0.74 per diluted share, in 2018. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring-related items, asset impairment charges, acquisition expenses, non-operating pension costs, and certain income tax-related events and other items, if any, the exclusion of which the Company believes improves comparability and analysis of the ongoing operating performance of the business.

Gross profit was $270.10M in the first quarter, a boost of $19.50M or 7.8 percent, contrast with $250.60M in the same period in 2018. Gross profit as a percentage of sales was 20.0 percent, contrast with 19.2 percent in the same period in 2018. First-quarter selling, general and administrative expenses increased $5.10M from the prior year to $142.60M. This increase was driven by higher expenses related to attained businesses as, absent these costs, selling, general and administrative expenses were slightly down contrast to last year’s quarter.

Corporate/Tax:

Net interest expense for the first quarter of 2019 increased to $15.40M, contrasts with $13.40M during the same period in 2018, mainly because of increased expense from higher U. S. interest rates and reduced interest income on lower offshore cash balances. The 2019 first-quarter effective tax rates on GAAP and base earnings were 23.7 percent and 24.1 percent, respectively, contrast with 24.1 percent and 25.9 percent, respectively, in the prior year’s quarter. The lower 2019 GAAP and base effective tax rates were attributable to a reduced impact of the Global Intangible Low Taxed Income (GILTI) tax as well as an increased tax benefit from equity based compensation. The effective rate on GAAP earnings reduced to a lesser extent because of the 2018 benefit of one-time adjustments related to the U.S. Tax Cuts and Jobs Act of 2017.

Cash Flow and Free Cash Flow:

For the first quarter of 2019, cash generated from operations was $92.30M, contrast with $119.80M in 2018, a decrease of $27.50M.  This decrease was driven by a $19.00M increase in cash consumption by working capital. While the seasonal changes in business activity consumed cash in both periods; this increase was more meaningful in 2019 because of greater year-over-year increases in business activity from the prior year’s end. Moreover, accrued management incentives paid in the first quarter of 2019 were higher than those paid in the first quarter of 2018.

Free cash flow for the first three months of 2019 was $9.50M, contrast with $44.90M in the same period last year, reflecting the $27.50M decrease in cash flow from operations discussed above. The remaining decrease in free cash flow was driven by current-quarter increases in net capital expenditures and cash dividends, which were $41.70M and $41.10M, respectively, contrast with $36.00M and $38.80M, respectively, in 2018. (See free cash flow description and reconciliation later in this release. Free cash flow is defined as cash flow from operations minus net capital expenditures and cash dividends. Net capital expenditures are defined as capital expenditures minus proceeds from, and/or plus costs incurred in, the disposition of capital assets.)

As of March 31, 2019, total debt was about $1.41B, contrast with $1.39B as of December 31, 2018, and the Company had a total-debt-to-total-capital ratio of 43.9 percent at end of the first quarter, unchanged from year-end 2018. Cash and cash equivalents were $124.30M as of March 31, 2019, contrast with $120.40M at December 31, 2018.

SON has a market value of $6.56B while its EPS was booked as $3.14 in the last 12 months. The stock has 100.64M shares outstanding. In the profitability analysis, the company has gross profit margin of 19.50% while net profit margin was 5.80%. Beta value of the company was 0.92; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.70.

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Elizabeth Villa

I am Elizabeth Villa and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking. Address: 4211 Angie Drive, Los Angeles, CA 90017, USA Phone: (+1) 714-933-4836 Email: elizabeth.villa@up24news.com

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