Sonoco (SON) Hikes Prices for Uncoated Recycled Paperboard

Sonoco Products Company SON is implementing price rise by $50 per ton for all grades of uncoated recycled paperboard (URB) sold in the United States and Canada. The price hike will be effective relating to the shipments starting Jul 15.

Sonoco is executing price-rise actions in response to the solid demand across its United States and Canada URB mill network, which is driving significantly larger order backlogs as well as escalating input costs, especially freight, energy, papermaking chemicals and packaging materials. These inflationary cost pressures might negatively impact Sonoco’s margin in second-quarter 2021.

Meanwhile, the company’s Consumer Packaging segment will continue to gain from strong demand for food packaging, aided by consumers’ at-home consumption in response to the pandemic. Demand in the Industrial Paper Packaging segment’s served markets is improving on reopening of the global industrial market from the pandemic-induced slump. Paperboard operations in North America are gaining from rising demand for the tissue and towel markets. Sonoco’s Protective Solutions segment is likely to witness higher demand in the pharmaceutical and appliance-served markets during the June-end quarter. The ThermoSafe packaging business is anticipated to gain from a strong flu vaccine season, and robust demand from its base pharmaceutical and food customers during the upcoming quarter.

Given the healthy demand trends in most of its consumer and industrial businesses, Sonoco projects second-quarter 2021 adjusted earnings per share between 82 cents and 88 cents compared with the earnings of 79 cents recorded in the prior-year quarter. For the current year, management has raised its adjusted earnings per share guidance to $3.50-$3.60 from the prior estimate of $3.40 to $3.60. The upbeat guidance assumes that global business activity will continue to improve on the government stimulus measures and reopening of businesses.

The company is focused on driving growth and margin expansion, and generating solid free cash flow. Apart from this, its focus on optimizing businesses through productivity improvement, standardization and cost control will aid performance in the upcoming period.

Price Performance

Sonoco’s shares have gained 31.6% over the past year compared with the industry's rally of 38.2%.

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Zacks Rank & Stocks to Consider

Sonoco currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industrial products sector are Tennant Company TNC, Encore Wire Corp. WIRE and Arconic Corp. ARNC. All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant has an anticipated earnings growth rate of 49.5% for 2021. The company’s shares have gained around 18%, year to date.

Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. Year to date, the company’s shares have rallied nearly 36%.

Arconic has a projected earnings growth rate of 447% for the current year. The stock has appreciated around 21%, so far this year.

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