Sonoco (SON) Misses Q4 EPS by 1c, Beats on Revenues; Boosts FY18 EPS Mid-Point Guidance Above Consensus

Note: EPS may not be comparable

Sonoco (NYSE: SON) reported Q4 EPS of $0.72, $0.01 worse than the analyst estimate of $0.73. Revenue for the quarter came in at $1.3 billion versus the consensus estimate of $1.27 billion.

Fourth Quarter and Full-Year Highlights

• Fourth-quarter 2017 GAAP earnings per diluted share were $0.06, compared with $1.04 in 2016; 2017 results include net after-tax charges of $0.67 per share mostly due to the impact of the 2017 U.S. Tax Cuts and Jobs Act as well as restructuring expenses, acquisition costs and other one-time items. Prior-year results included a net after-tax gain of $0.42 per diluted share from the sale of the Company’s blowmolding plastics operations, net of restructuring expenses, acquisition costs and other one-time items. Full-year 2017 GAAP earnings per diluted share were $1.74, compared to $2.81 in 2016.
• Base net income attributable to Sonoco (base earnings) for the quarter was $0.72 per diluted share, compared with $0.62 in 2016. Full-year 2017 base earnings per diluted share were $2.79, compared to $2.72 in 2016. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided fourth-quarter 2017 base earnings guidance of $0.68 to $0.74 per diluted share and full-year guidance of $2.75 to $2.81.
• Fourth-quarter 2017 net sales grew to $1.30 billion, up 13.7 percent, from $1.14 billion in 2016. Full-year 2017 net sales grew 5.3 percent to a record $5.04 billion, compared to $4.78 billion in 2016.
• Full-year cash flow from operations was $349.4 million for 2017, compared with $398.7 million in 2016. Free cash flow was $12.6 million, compared with $65.7 million in 2016. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)

First Quarter and Full-Year 2018 Outlook

• Sonoco expects first-quarter 2018 base earnings to be in the range of $0.69 to $0.75 per diluted share. Base earnings in the first quarter of 2017 were $0.59 per diluted share.
• Full-year 2018 base earnings per diluted share are expected to be in a range of $3.16 to $3.26, which is an increase from the previously announced estimate of $3.00 to $3.10. The increase in the Company’s 2018 base earnings guidance is due to a reduction in the expected annual effective tax rate to a range of 26 percent to 27 percent, compared to the previous estimate of 31.6 percent. The mid-point of the Company's new guidance reflects a 27 percent effective tax rate. This tax change reflects the Company's estimated impact of the recently enacted U.S. Tax Cuts and Jobs Act.
• Operating cash flow in 2018 is expected to be in the range of $560 million to $580 million, and free cash flow is expected to be in a range of $180 million to $200 million. This is $30 million to $50 million more than previous guidance as discussed earlier in the release.

GUIDANCE:

Sonoco sees FY2018 EPS of $3.16-$3.26, versus the consensus of $3.22.

For earnings history and earnings-related data on Sonoco (SON) click here.

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