Sonoco Products Q1 Adj. EPS Beats, Outlook Disappoints

Sonoco Products Co SON reported net income of $59.91 million for the first quarter, down 30.2 percent from $85.78 million in the previous year quarter. Its earnings also dropped 29.8 percent to $0.59 a share from $0.84 a share in the comparable period. Excluding adjustments, its earnings would have increased 20.4 percent to $0.65 from $0.54 in the prior year quarter and topped expectations by $0.05 a share.

The company stated that its net sales rose 1.65 percent to $1.23 billion from $1.21 billion in the year-ago quarter and came in above the Street expectations of $1.21 billion.

Reacting to the results, Sonoco Products President and CEO, Jack Sanders, commented "We are extremely pleased to deliver record first quarter base earnings results with each business segment reporting solid year-over-year improvement, including record first quarter performances in our targeted growth segments – Consumer Packaging and Protective Solutions. Overall, the Company benefited from a positive price/cost relationship, productivity improvements, lower pension and post-retirement benefit costs, and gains from volume/mix, which showed improvement even after excluding the positive impact of additional business days. Offsetting these positive factors were higher labor, maintenance and other operating costs, the negative impact of foreign currency translation and a higher effective tax rate."

The CEO added, "For the sixth consecutive quarter, operating profit in our Consumer Packaging segment reached record levels, improving 16 percent year over year due to solid improvement from global composite cans and flexible packaging. Overall, the segment benefited from a positive price/cost relationship, including a favorable change in LIFO inventory reserves, productivity improvements, lower pension costs and improved volume/mix, part of which was due to the additional business days in the quarter. These positive factors were partially offset by higher labor, maintenance and other operating costs, and the negative impact of foreign currency exchange rates. Growth in segment sales was due to the additional business days along with acquisitions, partially offset by loer selling prices and the negative impact of foreign currency translation."

Going forward, Sonoco Products guided second quarter base earnings to be $0.65-$0.70 a share, which fell short of the Street analysts' estimations of $0.72 a share. Similarly, the company confirmed its base earnings outlook of $2.64-$2.74 a share for the full year 2016. The mid-point is modestly below the analysts' expectations of $2.70 a share.

On Wednesday, shares of the company gained 0.59 percent.