Sonoco Earnings: Packaging Demand Remains Muted Amid Persistent Inventory Destocking

No-moat-rated Sonoco reported lackluster third-quarter results that were largely in line with our expectations. Net sales fell almost 10% year over year as both primary segments saw substantial declines. Lower volumes were met with unfavorable index pricing during the quarter as inventory destocking continues to weigh on demand for packaging in many of Sonoco’s end markets. Inflationary pressures and a shift in spending from goods to services adds to Sonoco’s amalgam of near-term headwinds. That said, the company has initiated additional cost-control measures that have buoyed margins, and we expect Sonoco will benefit from a subsequent rebound in demand when inventory destocking moderates. As such, we maintain our $55 fair value estimate.