On Thursday, Citi adjusted the price target for Sonoco Products (NYSE:SON), a global provider of diversified consumer packaging, industrial products, protective packaging, and supply chain services. The price target has been reduced to $64 from the previous $65 while the firm maintains a Buy rating on the stock.
The adjustment follows Sonoco's performance which saw the company's shares outperforming due to robust first-quarter results and a consistent full-year guidance, albeit slightly adjusted. The full-year guidance has been modified to account for a $0.10 decrease, now ranging between $5.00 and $5.30, considering a $0.10 impact from Protective.
In the first quarter, Sonoco experienced stronger-than-anticipated volumes in its Industrial segment, with expectations for a positive inflection to low single-digit percentage growth in the second quarter. However, the Consumer segment saw a mix of outcomes with pricing and cost factors being favorable over the second quarter, which is expected to offset the softness in Consumer volumes, which are projected to remain flat year-over-year. Additionally, the Industrial segment's price and cost faced headwinds due to index factors.
The company's outlook for the remainder of the year hinges on several key factors, including the strength of the US consumer, the potential resurgence of consumer packaged goods promotions, and the achievement of productivity targets exceeding $100 million. Citi's full-year 2024 estimate for Sonoco has been set at $5.25, influenced by flat Consumer volumes, a $50 per ton realization in June for uncoated recycled board (URB), and a $95 million productivity gain.
The revised estimate and an 8.5 times next twelve months (NTM) EBITDA target have led to the new $64 price target, with Citi reiterating its Buy stance on Sonoco Products shares.
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