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On Wednesday, UBS analysts initiated coverage on Sonoco Products (NYSE:SON) stock, assigning a Neutral rating with a price target of $48. The analysts expressed a balanced view on the company, which currently generates $5.7 billion in revenue and $989 million in EBITDA. While noting the transition to larger-scale businesses as a positive move, they raised concerns about growth and EBITDA in the new portfolio, particularly the European food can business. According to InvestingPro analysis, Sonoco appears fairly valued at current levels, with the stock trading at a P/E ratio of 54.9x.
The analysts highlighted that Sonoco’s leverage for 2025 is projected to be around 4.0x, which is higher than the company’s historical levels. Despite this, they pointed out an attractive free cash flow yield of approximately 11% for 2026. It’s worth noting that Sonoco has maintained its position as a reliable dividend payer, having raised dividends for 42 consecutive years - one of several key insights available in the comprehensive Pro Research Report on InvestingPro.
UBS’s 2025 EBITDA estimates for Sonoco are in line with consensus, with a slight increase of 2%. The analysts will monitor the company’s progress on achieving synergy milestones, targeting $100 million over 24 months, although UBS models $80 million.
They also plan to observe EBITDA growth and debt reduction as Sonoco adapts to its new portfolio structure. The analysts’ coverage initiation reflects a cautious stance, balancing potential growth with existing challenges.
In other recent news, Sonoco Products Company reported its first-quarter 2025 earnings, which fell short of analyst expectations. The company announced an adjusted earnings per share (EPS) of $1.38, missing the forecasted $1.42, and reported revenue of $1.7 billion, below the anticipated $2.02 billion. Despite these misses, Sonoco showcased significant year-over-year growth, with net sales up 31% and adjusted EBITDA increasing by 38% to $338 million. The company also improved its adjusted EBITDA margin by 170 basis points, reaching 16.6%. Sonoco has been actively restructuring, having completed the sale of its thermoform and flexibles business, which generated substantial proceeds used to reduce debt. The company reaffirmed its full-year 2025 guidance, expecting adjusted EPS between $6.00 and $6.20. Analysts from firms such as Bank of America and Truist Securities have noted the ongoing integration of recent acquisitions and the company’s strategic focus on core businesses. Despite the earnings miss, Sonoco’s leadership remains confident in its operational strategy and future prospects.
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