Sonoco Earnings: Portfolio Transformation Progresses but End-Market Demand Remains Mixed

Sonoco’s first-quarter results featured top-line revenue of $1.7 billion including the acquisition of Eviosys (rebranded as Sonoco Metal Packaging EMEA) and excluding the divestiture of TFP, which was in line with our expectations. Pricing was generally favorable, which was a welcomed change for Sonoco after material pricing headwinds last year. Sonoco’s exposure to tariffs appears limited as most of its products are sourced, produced, and sold locally. That said, steel for its metal can business is imported into the US and is subject to tariffs. Sonoco’s contracts contain pass-through provisions for raw material price increase though, so this should be passed through to its customers. While a slowdown in global gross domestic product growth or consumer spending would have an adverse effect on Sonoco, its portfolio transformation has increased its exposure to food end-markets, which should prove more resilient in a downturn. As such, we’ve maintained our $53 fair value estimate.