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On Wednesday, Wells Fargo downgraded Sonoco Products (NYSE:SON) stock, a leading provider of consumer packaging products, from Equal Weight to Underweight. Along with the downgrade, the firm also reduced the price target for the company's stock to $52 from $54.
The downgrade by Wells Fargo was attributed to several factors impacting Sonoco Products. The analyst noted that the acquisition of Eviosys has significantly increased the company's leverage. Additionally, the potential for divestitures or an equity raise has led to a low near-term visibility for the company's financials.
The firm also expressed concerns about the increasing consolidation within the confectionary and snack industry, which could create uncertainty for Sonoco Products going into 2025.
Moreover, there is a long-term volume risk associated with the growing adoption of GLP-1, a type of medication that could affect the company's business.
Wells Fargo has adjusted its earnings per share (EPS) estimates for Sonoco Products for the fiscal years 2024 and 2025 to $5.07 and $5.90, respectively. The revision reflects the potential challenges and uncertainties identified by the firm in its analysis.
The new price target of $52 represents a modest decrease from the previous target of $54, indicating a more cautious outlook on the stock's potential performance.
The downgrade to Underweight suggests that Wells Fargo advises a less favorable view of Sonoco Products' shares relative to other companies in the sector.
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