Analyst roundup: BMO sees Sonoco doing well over next 2-3 years on strong demand despite near-term challenges faced by its Industrial segment; Zacks sees Sonoco hitting US$20 million cost savings target by 2024 via productivity improvement, optimization

Sample article from our Packaging Industry

LOS ANGELES , July 6, 2022 () –

Following Sonoco’s upward revision of earnings guidance from US$1.20-1.30 to US$1.60-1.70 per share, analysts issued the following comments:

 

BMO Capital Markets/Mark Wilde

BMO analyst Mark Wilde believes that Sonoco will continue to do well over next two to three years. In a July 5 note, Wilde credits Sonoco CEO Howard Coker for cleaning up the company’s disparate portfolio. However, in Wilde’s view, Sonoco’s industrial segment may face near-term challenges with a recession looming. Wilde also notes that Sonoco’s 8.2x 2022E EBITDA valuation is ‘not particularly expensive.’

Wilde assigns a price target of $65 to the Sonoco stock, with 16% total return, on Sonoco’s higher product price realizations, strong volumes in two segments (Consumer and All Other), and better-than-expected performance of MetalPack, which was acquired in January 2022.

 

Zack’s Commentary

The Sonoco stock is rated ‘Buy’ at Zack’s, with consensus estimate for Sonoco's full-year earnings up 13%, according to a Zack’s report on July 4. Optimism surrounds the stock’s 1.6% year-to-date return, which Zack’s considers outperforming the sector peers, as the Industrial Products sector registers a -24.2% year-to-date return on average.

Zack’s sees Sonoco's industrial business eventually gaining from strong demand for global tubes, cores and cones. According to a report on June 23, Zack’s analysts expect that productivity improvement, standardization, synergies, supply chain optimization will help meet Sonoco's cost savings target of $20 million by 2024 despite near-term cost pressures from raw material sourcing, energy and freight.

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