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Analyst Turns Bullish On The 'New Sonoco'

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Analyst Turns Bullish On The 'New Sonoco'

An analyst from Baird has turned bullish on the new Sonoco Products Co (NYSE: SON), citing the underperformance of the company's shares year-to-date and the impending staggered catalysts on the horizon, including strategy shift, M&A, pricing catch-up and potential for industrial growth.

Analyst Ghansham Panjabi pointed out that the shares of Sonoco have considerably underperformed the S&P 500 packaging sector over the past five years.

Baird noted that the company has more cyclical end-market exposure relative to Packagers, with industrials accounting for 37 percent of sales. The business is balanced by broad-based consumer exposure across the portfolio, the firm added.

Accordingly, the firm believes the company would benefit from improving economic growth.

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Baird feels Sonoco Products would leverage its healthy balance sheet and pursue bolt-on acquisition targets. The firm noted that the company's consumer segment is focusing on fresh foods, while its protective solutions segment is leaning toward the outsized e-ecommerce market.

Baird is of the view that its 2018 earnings estimate of $3.05 per share is realistic, as 2017 headwinds abate.

"Accordingly, we believe that risk:reward is skewed favorably for Sonoco with downside limited by a healthy dividend yield (~3%) and an acceleration in economic growth/M&A summing to potential earnings power of $3.50/sh—in the context of minimal investor enthusiasm at current," the firm concluded.

As such, Baird upgraded shares of Sonoco Products from Neutral to Outperform and raised its price target from $55 to $60. Baird thinks the company is well positioned to outperform its peers over the next two years.

Latest Ratings for SON

DateFirmActionFromTo
Sep 2020UBSInitiates Coverage OnNeutral
Aug 2020Argus ResearchDowngradesBuyHold
May 2020Wells FargoUpgradesEqual-WeightOverweight

View More Analyst Ratings for SON
View the Latest Analyst Ratings

 

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