Sonoco Products Reports Mixed Results

Last night, Sonoco Products (SON) reported third-quarter EPS of $1.60 vs. $1.00 last year. That was well above expectations for $1.39 per share. Revenues increased 34% year-over-year, as the company continues to benefit from a strong pricing environment for packaging materials. SON also guided EPS expectations for the whole year to between $6.40 and $6.50 versus expectations for $6.25.

Despite the good earnings, the stock is down over 4% today due to the company’s warning that inventory was building at customers with the economy slowing, and that rising prices along with lingering supply chain issues took away $100 million in free cash flow in the quarter.

Although the news was disappointing, I do not think the market really expected SON to keep on its current pace of earnings. Even if EPS fall to $5.00 a share next year, which would only happen in a significant economic slowdown, the stock remains attractively valued. Buy SON below $65. My target is $75.