By Todd Chanko
"Packaged by weight, not by volume...contents may have settled during shipping." Investors in Sonoco Products, which I presented to our Barron's Investor Circle community last Tuesday, should probably settle down, as well.
Sonoco remains a solid, well-managed company with a 4.6% dividend yield.
Wednesday's post-earnings selloff pushed the 127-year old packaging company's stock down 16% -- leaving some shareholders feeling like they are staring into an empty can of Pringles.
By any measure, that Pringles can -- designed and produced by Sonoco since 1968 -- is much more than half-full. In fact, on Wednesday's conference call, CEO Howard Coker announced the opening of Sonoco's new facility in Thailand with production capacity of over 200 million cans annually to supply the "growing stack chips market in Asia." The region's appetite for chips apparently contributed to a 6% increase in local paper can volume during the first quarter.
Additionally, as I highlighted to Barron's Circle Investors, artificial intelligence is a surprising catalyst for the Hartsville, S.C.-based company. On Wednesday's call, management reported that it is investing $20 million in the decidedly un-digital business of manufacturing nail-wood reels -- giant spools around which wire is coiled for use in data-center construction. The unit already accounts for 10% of its industrial packaging division sales, and its sales jumped 13% in the first quarter. All this was reported on the management call for the first time.
Although investors were disappointed by guidance for 2026 earnings pointing to the lower end of the previously announced $5.80 to $6.20 range, they may want to recycle their perspective. Firstly, the company reiterated all other guidance issued earlier this year, with sales, Ebitda (earnings before interest, taxes, depreciation, and amortization), and operating cash flow expected to top 2025's performance. Moreover, the company increased its dividend by 2% during a challenging first quarter, continuing 43 consecutive years of dividend increases and uninterrupted dividend payments since 1925.
Few, if any segments of the global economy, escaped the knock-on effects of the U.S.-Israeli war on Iran during the quarter, and Sonoco was no exception. It alerted investors to the pressures on margins from cost increases in its petroleum-based inputs -- including energy and resins used in plastics. Yet, the company's longstanding relationships with such multinationals as PepsiCo, KraftHeinz, and Mondelez enabled it to raise prices for uncoated recycled board earlier this month and add surcharges for freight. Such pricing power should help Sonoco progress on its Profitability Performance Plan to increase margins by 200 basis points (two percentage points) within two years.
Management noted some nonrecurring charges that impacted the quarter's results, including one-time tax charges related to divestitures and a fire at one of one of its recycling plants. Otherwise, the tone of today's conference call was cautiously optimistic, noting positive seasonal trends for tuna and sardine cans in the Europe, Middle East and Africa region. Even the soccer World Cup may help Sonoco achieve its own goals, with its typical lift to Sonoco's unsalted snack packaging sales.
For those Barron's Investor Circle members who purchased Sonoco's shares last week, I understand why you might feel like a dented can. If I owned shares (Barron's writers aren't permitted to trade), I would hold on to them, enjoying my dividend income while the company's margins continue to expand. As for those investor circle members who haven't yet invested, today's selloff is an opportunity to invest in a company that has withstood two world wars, the Great Depression, and two global pandemics.
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April 23, 2026 08:00 ET (12:00 GMT)
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