SON Earnings Update

Sonoco Products (SON) is reacting very positively to the third quarter results released last night. The company’s recent investment in efficiency helps by offsetting weakening demand.

EPS declined to $1.46 from $1.60 a year ago as revenues fell 9.5%. However, this was $0.20 better than expectations thanks to the greater efficiencies, which management indicated on the conference call this morning will still benefit the company going forward.

Despite the earnings beat, guidance for the year was left unchanged at $5.25 to $5.40.  The manufacturing economy remains weak, and there is potential for a lot of variability in results towards the end of the year. However, I think the company is being conservative with this guidance. SON believes they’re capturing market share in the packaging industry, which along with the better efficiencies should set the company up for an earnings recovery next year.

Continue to buy SON under $60 as I target $70.