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D.A. Davidson Boosts Sonoco To Neutral, Says Mexican Audit An 'Isolated Situation'

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In a report published Friday, D.A. Davidson analyst Steven Chercover upgraded the rating on Sonoco Products Co (NYSE: SON) from Underperform to Neutral, while maintaining the price target at $42, saying that the company's shares were trading within 2 percent of the price target.

Sonoco reported its 2Q15 operating earnings at $0.66, versus $0.63 and $0.56 in 2Q14 and 1Q15, respectively. "On a GAAP basis, Sonoco earned $0.62 with the nickel difference attributable to $0.07 in restructuring costs offset by $0.02 in tax adjustments," analyst Steven Chercover said.

However, Chercover added, "While the quarter wasn't bad, the message wasn't good; Sonoco disclosed accounting irregularities at a Mexican contract packaging facility, which will necessitate restatements back to 2012, which makes current results "preliminary"."

The EPS estimate has been reduced from $2.64 to $2.53 to reflect a downward revision in the company's guidance from $2.60-$2.70 to $2.48-$2.58. The reduction reflects the Mexican situation as well as "a slower than anticipated synergy capture from last year's Weidenhammer acquisition and other modest headwinds," the D.A. Davidson report stated.

Chercover pointed out that while Sonoco's valuation was seen as "lofty" for some time, the company's integrity was "never questioned." The analyst considers the Mexican situation as "an isolated event."

Latest Ratings for SON

Apr 2018UBSInitiates Coverage OnBuy
Apr 2018Bank of AmericaDowngradesBuyNeutral
Mar 2018Vertical ResearchUpgradesHoldBuy

View More Analyst Ratings for SON
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Posted-In: D.A. DavidsonAnalyst Color Upgrades Analyst Ratings


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