SON: Bearish Technicals Signal Potential Put Play

Sonoco is a global designer and manufacturer of engineered and sustainable packaging. The company operates through two reportable segments: Consumer Packaging and Industrial Paper Packaging. Consumer Packaging provides rigid packaging in paper, metal (including the newly acquired 'Eviosys' business), and plastic, serving the consumer staples market, primarily food, beverage, household, personal, and pharmaceutical products. Key products include rigid paper containers, metal food cans, and aerosol packaging. The Industrial Paper Packaging segment focuses on goods produced from recycled fiber, such as paperboard tubes, cores, cones, cans, partitions, and paper-based protective materials, supporting consumer staples, consumer discretionary, and industrial end markets. Sonoco differentiates itself through vertical integration, using internally produced paper for its fiber-based packaging, technological leadership, and a reputation for quality, serving customers globally with a focus on sustainability and integrated packaging solutions.

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SON's technical outlook is decidedly bearish. The stock is trading at $40.05, significantly below both its 50-day SMA of $43.55 and 200-day SMA, with the latter calculated at $45.09. The EMA-21 is $40.91, showing short-term weakness as well. Momentum indicators confirm this bearish sentiment; the RSI is 40.31, indicating oversold conditions, and the MACD is strongly negative at -0.97, with the MACD signal line also negative. The ADX at 23.70 suggests a defined downtrend. The recent price action shows a consistent decline, with few signs of reversal. The stochastic oscillator shows the %K at 26.69 and the %D at 21.99, indicating that while it's not extremely oversold, it's leaning in that direction. The ROC 20-day is -6.54%, solidifying the bearish outlook. The stock price has fallen from a recent high of $47.79 in mid-September to the current price, confirming a strong downtrend. Given the bearish momentum and downtrend, further declines are likely over the next 1-3 months.

Sonoco's MD&A presents a complex picture, marked by significant strategic shifts and the integration of a major acquisition. `Net sales` for the third quarter of 2025 increased by 57.3% to $2.1 billion, largely driven by the $758.2 million contribution from the Metal Packaging EMEA business (Eviosys acquisition). However, this growth was partially offset by a decline in volume/mix of $39.9 million and the loss of $14.1 million in net sales related to the 2024 divestiture of two production facilities in China. The `Gross profit` margin decreased slightly from 22.1% to 21.9%. For the first nine months of 2025, `Net cash provided by operating activities` was $276.9 million, a decrease of $160.7 million compared to the $437.6 million in the same period of 2024. This decline is attributed to net working capital changes. The company's strategic focus includes streamlining operations and deleveraging, as evidenced by the sale of TFP for approximately $1.8 billion and the pending sale of ThermoSafe for up to $725 million. Management acknowledges uncertainties related to global trade developments and potential impacts from tariffs, but believes its diversified manufacturing network and pricing adjustments can mitigate risks. Overall, the company's performance reflects both the benefits of strategic acquisitions and the challenges of integrating them while managing ongoing portfolio adjustments.

Sonoco's Q2 2025 earnings call presents a moderately bullish outlook, balancing strong performance in some segments with macroeconomic headwinds. While the company maintained its full-year guidance, there are some nuanced shifts within. Net sales grew 49% and adjusted EBITDA was up 25%, with adjusted EBITDA margin expanding by 100 basis points to 17.2%. However, adjusted EPS is now targeted at the 'low end of our range of $6 to $6.20'. Management highlighted that they are 'maintaining our guidance with net sales in the range of $7.75 billion to $8 billion' and 'remain confident in our range of $1.3 billion to $1.4 billion' for adjusted EBITDA. The Consumer Packaging segment showed impressive growth, with adjusted EBITDA up 115%, driven by the SMP EMEA acquisition and volume gains in the U.S. metal business. The Industrial segment also performed well, with EBITDA margins expanding to 19%. However, the SMP EMEA experienced a softer-than-expected first half due to a delayed vegetable harvest season and sardine availability, but expects a recovery in Q3. The company is also focused on synergy capture from the SMP EMEA acquisition, now projecting $40 million to $50 million in run rate synergies by the end of the year, with line of sight to greater than $100 million in cost savings through 2026.

SON's financial performance presents a mixed picture. Revenue has fluctuated, starting at $1,308.6M in Q1 2024 and reaching $2,131.1M in Q3 2025, indicating some growth. However, profitability, as measured by the `grossProfitRatio`, has remained relatively stable, hovering around 21-23%, with no clear upward trend. A significant concern arises from the company's debt levels. `TotalDebt` has increased substantially from $3,367M in Q1 2024 to $1,613.7M in Q3 2025, suggesting increased financial risk and leverage. The `operatingCashFlow` presents a volatile picture, ranging from negative -$208.1M in Q1 2025 to a positive $396.2M in Q4 2024, with the most recent quarter showing a healthy $291.5M. While revenue has grown and operating cash flow is currently positive, the significant increase in debt raises solvency concerns, warranting a cautious outlook.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.