Sonoco Products Co. (SON), the consumer packaging company, is slated to report second-quarter fiscal 2014 results on Jul 17. In the last quarter, it delivered a positive surprise of 1.96%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Sonoco expects second-quarter 2014 earnings per share in the range of 63–67 cents compared with 59 cents earned in the prior-year quarter. This reflects annual growth of 7% to 14%.
After having a difficult run following the period of recession, the Display and Packaging segment’s sales and profit improved in 2013. The momentum has continued in the first quarter of 2014 as well driven by volume increases in both international contract packaging and the U.S. display and packaging services.
Furthermore, Sonoco’s annual $20 million contract from Energizer Holdings Inc. (ENR) will leverage Sonoco’s segments in supplying e-packaging materials and will also provide packaging services. Furthermore, the pickup in promotional activity at the customer level signals an increased volume outlook for packaging goods.
The severe winter weather in January and February significantly disrupted Sonoco’s operations as well as its customers. However, with the weather improving, the company noted a significant rebound in demand, this was followed by a return of sales orders to a more normal and expected level in March. Although overall volume was essentially flat, second-quarter earnings benefited from a 50 basis point increase in the company's overall gross margin due to a positive price/cost relationship.
Volume will remain affected for the balance of 2014 and energy and raw material costs will continue to pose as headwinds as the price of certain resins have increased.
Earnings Whispers?
Our proven model does not conclusively show that Sonoco is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Sonoco has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate stands at 66 cents, which is in line with the Zacks Consensus Estimate.
Zacks Rank #1 (Strong Buy): Sonoco has a Zacks Rank #1. The Zacks Rank #1 together with 0.00% earnings ESP makes surprise prediction difficult.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Graphic Packaging Holding Company (GPK) has an earnings ESP of +5.88% and a Zacks Rank #2 (Buy).
International Paper Company (IP) has an earnings ESP of +3.70% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment