Last week, Sonoco Products Company (SON) reported fourth quarter earnings of 58 cents per share, beating the Zacks Consensus Estimate of 51 cents and prior year EPS of 49 cents. The earnings growth in the quarter was driven by higher volumes and strong productivity benefits.
 
Quarterly sales improved 7.2% to $1.0 billion from $934.6 million a year ago. The year over year growth in sales was primarily led by increased volumes in the Tube and Cores/Paper, Consumer Packaging and Packaging Services segments along with the favorable currency translation impact, partially offset by lower selling prices in the Tubes and Cores/Paper segment. 

Sales in the Consumer Packaging segment were up 8.0% compared to last year due to higher volumes for rigid plastic containers and composite cans, higher selling prices and the favorable impact of foreign currency translation. Operating profit saw a robust rise of 48.1% as the segment benefited from higher volumes, a favorable price/cost relationship and productivity improvements, partially offset by higher pension costs. 

Tubes and Cores/Paper segment sales increased 9.7% driven by higher volumes of international industrial converted products and North American paperboard along with a positive foreign currency translation effect. However, the segment’s operating profit was down 18.6% as increased volumes and productivity improvements were more than offset by unfavorable comparison of price/cost relationship and higher pension costs. 

Sales in the Packaging Services segment were up 7.6% due to improved volume in the point-of-purchase display and fulfillment business. However, operating income declined 17.8% due to an unfavorable shift in business mix and higher pension costs. 

Sales in All Other Sonoco segment declined 8.0% due to lower volumes and prices in the wire and cable reels and molded plastics. The segment’s operating profit was down 4.5% as productivity improvements and a favorable price/cost relationship were more than offset by lower volumes and higher pension costs.
 
Sonoco generated $391 million in cash from operations and reduced its debt by $116 million during 2009. The debt-to-total capital ratio as of December 31, 2009 was 29.6%, compared to 37.0% at the end of 2008.
 
Sonoco raised its earnings guidance for 2010. The company now expects EPS in the range of $2.00–$2.15, compared to the previous guidance of $1.95–$2.05. For the first quarter of 2010, the company anticipates EPS between 40–45 cents, compared to 29 cents reported in the first quarter of 2009. The earnings guidance is based on assumptions of improved business conditions and lower pension expenses, partially offset by unfavorable price/cost relationship.
 
The Zacks Consensus Earnings Estimate is 43 cents for the first quarter of 2010 and $2.09 for the full year. Of the 12 analysts covering the stock, 8 analysts increased their 2010 earnings estimates in the last one week, while none of them have cut their estimates.
Read the full analyst report on “SON”
Zacks Investment Research