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Featured News from MarketBeat
Sonoco Stock Drops as Inflation Hits Q1 ResultsReported by Chris Markoch. Originally Published: 4/24/2026. 
Key Points
- Sonoco reported flat adjusted EPS of $1.20, missing expectations and putting its 2026 growth outlook at risk.
- Rising energy costs, softer volumes, and higher debt levels are creating near-term pressure on margins and cash flow.
- Growth in industrial reels tied to AI and data center demand offers a potential long-term catalyst for the stock.
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Shares of Sonoco Products (NYSE: SON) fell after the company reported its Q1 2026 earnings. Sonoco missed both top- and bottom-line expectations, with the business feeling pressure largely from rising energy costs and other inflationary headwinds. Sonoco’s Q1 report is a useful example of what can happen during earnings season when results fall short of expectations. Management had previously been bullish, forecasting roughly 20% adjusted earnings growth for fiscal 2026. That target now looks at risk after Q1 results came in flat year-over-year (YOY), but the headline requires additional context. An Earnings Number That Gets Complicated
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Sonoco reported Q1 2026 adjusted earnings per share (EPS) of $1.20 and described that as flat YOY. The prior-year adjusted EPS for Q1 2025 was $1.38, but that included contributions from ThermoSafe, the temperature-assurance logistics business Sonoco subsequently divested. Removing ThermoSafe from the comparison, continuing operations also generated $1.20 in Q1 2025, so the “flat” characterization is technically accurate on a like-for-like basis. That distinction matters for shareholders. Investors who owned Sonoco a year ago benefited from $1.38 in EPS, while the current portfolio is smaller; the 18-cent gap represents earnings that left with ThermoSafe. Whether the divestiture was worthwhile depends on two things. First, how Sonoco deploys the proceeds: the company has primarily used the cash to reduce debt and support the integration of Eviosys. Second, whether the remaining two-segment business can grow earnings from the $1.20 baseline. Management’s decision to guide toward the low end of full-year adjusted EPS guidance of $5.80–$6.20 suggests that, while growth is still possible, the company faces meaningful near-term headwinds from softer volumes and higher input costs. Cash Flow: Weak Operating Cash Flow, Understandable ReasonSonoco's Q1 operating cash flow was roughly $368 million versus about $208 million in Q1 2025. Part of the year-over-year difference—approximately $103 million—relates to taxes paid on gains from the ThermoSafe divestiture, a nonrecurring item. Management left full-year operating cash flow guidance unchanged at $700 million to $800 million, signaling that they view Q1 as an anomaly rather than the start of a trend. Still, total debt increased by $363 million during the quarter, and net debt to total capital rose to 55.5% from 52.1% at year-end. That level isn’t alarming yet, but it’s worth monitoring: if free cash flow remains pressured into Q2, leverage could become a larger concern. A Growth Catalyst Hidden in the Industrial SegmentAmid the headlines, one bright spot stands out: reels volume—the industrial spools used to transport fiber-optic cable—grew roughly 7% in Q1. That strength is tied to the ongoing buildout of data-center and AI infrastructure, as hyperscalers expand capacity and demand for fiber connectivity accelerates. Sonoco is addressing that demand: the company is investing $20 million to expand nailed-wood reel capacity in Hartselle, Alabama, adding about 15% incremental capacity. For investors looking beyond near-term inflationary pressures, this positions Sonoco as a low-profile infrastructure play. Priced for Perfection, What’s Next for SONSON gapped down after the earnings miss, which shouldn’t have been a total surprise. The stock traded near its 52-week high in the weeks before the report, making this earnings release a clear make-or-break moment. 
The stock fell below its 50-day simple moving average and is now trading near its 200-day SMA—a potentially important technical line in the sand. A sustained break below the 200-day could put the 52-week low back in play. Conversely, signs of being oversold could present a buying opportunity for patient, risk-tolerant investors. Is the Dividend Enough?If Sonoco hits the high end of its full-year EPS guidance, it would imply about 8% YOY growth. But management is guiding toward the lower end of the $5.80–$6.20 range, which would amount to essentially flat earnings YOY. There are reasons to think Sonoco’s outlook could improve if inflationary pressure eases, but that conditional view—“if inflation cools, then...” —is not always a reliable investment thesis on its own. Even so, SON looks inexpensive at roughly 8.4X forward earnings, a discount to its historical average. And investors still receive a stable dividend: Sonoco increased its payout for the 43rd consecutive year on April 15. Analysts currently have a consensus price target of $61.78 on SON, which is more than 20% above the current price. Investors should watch for any meaningful re-ratings or price-target revisions in the coming weeks. |
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