Sonoco (SON) To Report Q1 Earnings: What's In The Cards?

Global manufacturer of consumer and industrial packaging products, Sonoco Products Co. (NYSE:SON) is scheduled to report first-quarter 2017 results on Apr 20, before the market opens. In the last reported quarter, Sonoco’s both top-line and bottom-line had dipped on a year-over-year basis and also fell short of the Zacks Consensus Estimate. Let’s see how things are shaping up prior to this announcement.

Earnings Whispers

Our proven model does not conclusively show that Sonoco is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: Sonoco’s Earnings ESP is -3.45% as the Most Accurate estimate of 56 cents is pegged lower than the Zacks Consensus Estimate of 58 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Sonoco’s Zacks Rank #3 increases the predictive power of the ESP, its negative ESP makes a beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Surprise History

In the last reported quarter, the company posted a negative earnings surprise of 1.59%. Sonoco has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive earnings surprise of 4.99%.

Sonoco Products Company Price and EPS Surprise

Factors at Play

For first-quarter 2017, the company expects earnings per share in the range of 55–63 cents. Compared with the year-ago quarter’s earnings of 65 cents per share, the midpoint of the guidance reflects a decline of 9%. Results will be impacted by price/cost headwinds from rising raw material costs and sale of the blow-molding operations. Further, the quarter will have two fewer days than in the prior year. Moreover, traditionally the first quarter is the weakest for the company.

Old Corrugated Cardboard (OCC) and resin prices are on the rise. The company has implemented a $60 per ton increase for uncoated recycled paperboard and an 8% increase for tubes and cores in the U.S. and Canada. These increases, as well as contractual price adjustments, should offset the increased cost for OCC.

Price Performance

Sonoco has underperformed Zacks categorized Containers-Paper/Plastic industry in the past six months. The company’s shares gained around 0.9% compared with roughly 1.7% growth recorded by the industry.

Stocks to Consider

Here are some stocks in the industrial products sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Deere & Company (NYSE:DE) has an Earnings ESP of +5.03% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corporation (NYSE:AGCO) has an Earnings ESP of +5.88% and carries a Zacks Rank #2.

Avery Dennison Corporation (NYSE:AVY) has an Earnings ESP of +2.88% and a Zacks Rank #2.

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