Sonoco (SON) Q2 Earnings Beat Estimates, Narrows Guidance
Zacks Investment Research | Jul 20, 2017 10:58PM ET
Sonoco Products Company (NYSE:SON) reported second-quarter 2017 adjusted earnings of 71 cents per share, down 3% year over year. However, earnings beat the Zacks Consensus Estimate of 70 cents and came within management’s guidance range of 67–73 cents.
The bottom line was negatively impacted by lower volume/mix, inflated operating costs and higher taxes. These were partially mitigated by positive price/cost relationship, manufacturing productivity improvements, and lower management incentives.
On a reported basis, including one-time items, earnings per share was 43 cents compared with 55 cents in the prior-year quarter.
Operational Update
Net sales of $1.24 billion were up 2.9% year on year, and also beat the Zacks Consensus Estimate of $1.22 billion. Higher selling prices to combat rising raw material prices and incremental sales from acquisitions (net of divestitures) were somewhat negated by lower volume and the negative impact of foreign exchange.
Cost of sales was $1 billion, up 4.3% year on year. Gross profit during the quarter totaled $236 million, down 3% year over year. Gross margin contracted 110 basis points (bps) year over year to 19% hurt by lower volume/mix and higher raw material prices, partially offset by manufacturing productivity gains.
Selling, general and administrative expenses were $157 million, up 24% year over year, chiefly due to lump sum pension settlements, acquisition and acquisition-related costs and wage inflation. Lower management incentives were a minor neutralizing factor. Sonoco’s adjusted operating income was $78.7 million in the quarter, down 32% from $115 million in the prior-year quarter. Operating margin contracted 330 bps year over year to 6.3% in the quarter.
Sonoco Products Company Price, Consensus and EPS Surprise
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