Industrial Strength Offsets Consumer Weakness in Sonoco's Third Quarter

A strengthening economy had mixed effects on Sonoco's third quarter. Sales to industrial buyers were more robust than we thought, offset by relatively less demand and pricing strength for consumer products. Profitability was similarly mixed. All told, adjusted net income contracted to $87 million from $98 million in the prior year. We expect the fourth quarter to be incrementally stronger, though 2021 should bring a turnaround for results. Our $42 per share fair value estimate and no-moat rating are both unchanged, with our outlook mostly intact. We view Sonoco as overvalued at current prices, as shares trade nearly 25% above our fair value estimate.