Red Flags: Why It Might Be Time to Pack Up Sonoco Products

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Source: Thinkstock

Source: Thinkstock

Sonoco Products (NYSE:SON) is one of the largest diversified global packaging companies in business today. As expected, it manufactures and sells industrial and consumer packaging products. It does business primarily in the United States, Europe, and Canada. The company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. The Consumer Packaging segment offers round composite cans, shaped rigid paperboard containers, fiber caulk/adhesive tubes, aluminum, steel, and peelable membrane easy-open closures for composite and metal cans. It also makes plastic bottles, jars, jugs, cups, and trays.

The Paper and Industrial Converted Products segment provides recycled paperboard, chipboard, tubeboard, lightweight corestock, boxboard, linerboard, corrugating medium, and specialty grades. Further, it offers paperboard tubes and cores, molded plugs, and reels, as well as is engaged in the collection, processing, and recycling of old corrugated containers, paper, plastics, metal, glass, and other recyclable materials. The Display and Packaging segment offers point-of-purchase displays, custom packaging, fulfillment, primary package filling, supply chain management, and paperboard specialty products. The Protective Solutions segment provides engineered, custom-designed protective, temperature-assurance, and retail security packaging solutions. The stock has been steadily rising, up 18 percent in a year. But can this momentum continue?

Well, to answer this question, we have to know how the company is performing and whether it can continue to perform well. In its latest quarter, GAAP net income attributable to Sonoco was $61.5 million, or $0.59 per diluted share, compared with $55.0 million, or $0.53 per diluted share, in 2013. Base earnings in the quarter were $65.4 million, or $0.63 per diluted share, compared with $60.8 million, or $0.59 per diluted share, in 2013.

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