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Can Sonoco (SON) Pull a Surprise This Earnings Season?

Sonoco Products Co. SON is scheduled to report first-quarter 2016 results before the opening bell on Apr 21, 2016. In the last four quarters, the company has delivered a negative average earnings surprise of 1.59%. Let’s see how things are shaping up prior to this announcement.

Factors at Play

For the first quarter of 2016, the company expects earnings per share in the range of 57 cents to 62 cents. Compared with the year-ago quarter figure of 54 cents per share, this reflects year-over-year growth of 6–15%.

In the last reported quarter, the company had witnessed some benefit from the previously announced 5–8% price increase for tubes and core in the U.S. and Canada. This trend is expected to continue into 2016 as well.

Sonoco also stands to benefit from the Weidenhammer and Graffo acquisitions, cost-saving actions and price increases. Moreover, its focus on executing on the ‘Grow and Optimize’ strategy, introduction of new products, investments in capacity, optimizing its supply chain, and driving productivity improvements should spur growth. However, the slowdown in manufacturing in the U.S. and emerging markets, along with headwinds from the strengthening U.S. dollar, may keep impeding growth at its industrial businesses.

Earnings Whispers

Our proven model does not conclusively show that Sonoco is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. Unfortunately, that is not the case here, as we will see below.

Zacks ESP: Sonoco has an Earnings ESP 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 60 cents.

Zacks Rank: Though Sonoco’s Zacks Rank #2 (Buy) increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some stocks in the sector which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Nordson Corporation NDSN has an Earnings ESP of +1.09% and a Zacks Rank #2.

Parker-Hannifin Corporation PH has an Earnings ESP of +1.38% and a Zacks Rank #2.

Rockwell Automation ROK has an Earnings ESP of +3.03% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SONOCO PRODUCTS (SON): Free Stock Analysis Report
 
ROCKWELL AUTOMT (ROK): Free Stock Analysis Report
 
PARKER HANNIFIN (PH): Free Stock Analysis Report
 
NORDSON CORP (NDSN): Free Stock Analysis Report
 
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