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Sonoco Products Company (SON) Q2 2026 Earnings Call July 23, 2026 8:00 AM EDT

Company Participants

Roger Schrum - Head of Investor Relations & Global Marketing Communications
Robert Coker - President, CEO & Director
Paul Joachimczyk - CFO & Principal Accounting Officer

Conference Call Participants

George Staphos - BofA Securities, Research Division
Anthony Pettinari - Citigroup Inc., Research Division
John Dunigan - Jefferies LLC, Research Division
Michael Roxland - Truist Securities, Inc., Research Division
Mark Weintraub - Seaport Research Partners
Hillary Cacanando - Deutsche Bank AG, Research Division
Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division
Matthew Roberts - CGS International
Gabe Hajde - Wells Fargo Securities, LLC, Research Division
Anojja Shah - UBS Investment Bank, Research Division

Presentation

Operator

Hello, everyone. Thank you for joining us, and welcome to the Sonoco Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Roger Schrum, Head of Investor Relations and Global Marketing Communications. Roger, please go ahead.

Roger Schrum
Head of Investor Relations & Global Marketing Communications

Thank you, Warren, and good morning, everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's Second Quarter 2026 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website later today, and we'll post a transcript later this week.

If you would turn to Slide 2, I'll remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially.

Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition

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Investors looking for high-yield dividend stocks typically don't expect them to generate alpha. But in some cases, they do. Take Sonoco Products (SON +2.26%), for example.

Sonoco Products is not the oil and gas company, which is spelled differently. Sonoco Products makes packaging -- metal, paper, and plastic packages for consumer and industrial uses.

It's not a stock many people know, but Sonoco is not only paying an above-average dividend yield; it is also beating the S&P 500 and the Nasdaq.

Image source: Getty Images.

Sonoco crushes S&P 500 and Nasdaq Sonoco's stock has posted impressive numbers this year. The stock has returned 30% year to date, beating the Nasdaq's 10.3% and the S&P 500's 8.5%.

Further, the stock has a dividend yield of 3.78%, well above the S&P 500 average. It has also boosted its dividend annually for the past 43 consecutive years. If it keeps boosting the payout annually for seven more years, it will be a Dividend King.

Sonoco Products is coming off a quarter in which sales dropped 2%, but earnings rose 26% year over year to $0.68 per share. This is largely due to an expense-reduction plan that led to a 4% drop in selling, general, and administrative expenses in the latest quarter.

Sonoco's Profitability Performance Plan targets $32 million in savings this year and $150 million to $200 million over the next three years. It is also streamlining operations by selling off some of its lower-performing assets, like ThermoSafe. The expense reductions will offset some of the higher material costs the company is experiencing due to inflation and tariffs.

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Also, net sales will stall out in fiscal 2026, as the company guides for revenue between $7.25 billion and $7.75 billion, which would be on par with last year at the midpoint. Further, cash flow from operations is anticipated to be between $700 million and $800 million, up slightly from last fiscal year.

Sonoco has more room to run Sonoco's stock has rallied this year mainly due to its cost-cutting initiative and the pivot to consumer packaging from industrial. Consumer packaging is a higher-margin business and less cyclical than industrial packaging. The company has been steadily increasing consumer sales, and the consumer side now makes up about 67% of its total sales, up from 42% in 2020.

Sonoco has strong cash flow, a low payout ratio of 38%, and is fully committed to its dividend. It has raised its dividend for 43 straight years and has paid a dividend for 404 straight quarters (since 1925).

While analysts expect only 2% earnings growth in fiscal 2026, they see 10% growth in 2027, likely due to the benefits of the pivot and the Profitability Performance Plan kicking in.

Roughly 50% of analysts rate Sonoco as a buy, while 50% rate it a hold. It has a median price target of $63 per share, which suggests 12% upside.

Plus, the stock is still dirt cheap, even after the 29% surge. It is trading at 9 times forward earnings and has a minuscule five-year PEG ratio of 0.20, which makes it a great value and a good buy -- for both dividends and returns.