Founded in 1899, Sonoco Products (SON) is a global provider of consumer, industrial, healthcare and protective packaging for many of the world’s most recognized brands in markets such as appliances and electronics, automotive, beverages, food and pet care, explains growth stock specialist Hilary Kramer, editor of Value Authority.

Sonoco’s operations consist of global consumer packaging businesses (46% of 2020 sales) and industrial businesses, (36% of 2020 sales) including Sonoco Recycling, one of the world’s largest recyclers.

The company is international in nature, with more than 300 facilities in 33 countries. Sonoco’s financial performance in recent years has been steady with moderate growth. Revenues increased from $4.85 billion to $5.23 billion from 2013 through 2020, while EPS increased to $2.31 from $3.36 over the same period.

The company generated free cash flow that was close to net income during this period, with which it paid dividends and made close to $1 billion in acquisitions to strengthen the company.

Coming off a flattish year in terms of revenues and earnings with the pandemic in 2020, Sonoco returned to growth this year, although results have been somewhat mixed. Through the first nine months of 2021, EPS has increased to $2.66 to $2.59 on a 7.5% increase in revenues.

However, operating profit in the company’s key consumer packaging segment has declined on higher costs, and the company will likely end the year close to the mid-range of their $3.40 t0 $3.60 EPS guidance for 2021 to start the year. While this is a not a poor result, investors may have expected better with easy comparisons from 2020.

Innovation is important to Sonoco, as the company believes it helps their customer’s create strong brands. The company’s I6 Innovation Process and industry-leading packaging and services portfolio create impactful customized solutions.

To show its commitment to innovation the company in 2016 opened a $12 million innovative Packaging Solutions Studio.The studio features a Consumer Interaction Space that enables direct observation of consumers interacting with packaging in a variety of home applications in order to gain insights.

Like many value stocks, SON share price peaked in early May this year, at close to $70 a share. This time frame was just before interest rates topped, COVID cases rose, and it became apparent that the supply chain was becoming an issue, all of which drove a preference for growth shares.

However, recent price increases have not been fully reflected in results, and this should lead to an acceleration in growth in 2022, and I expected the company to earn $3.85 a share as provided the economy remains sound.

 This, along with a better supply chain situation, should help the stock recover the ground it has lost since May and achieve my $70 target. In summary, SON is a high-quality company selling at a discount, even though record earnings are ahead for 2022. The stock is a buy under $63.

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