Sonoco Products Company SON announced that it has inked a deal with TOPPAN Holdings Inc. to sell its Thermoformed and Flexibles Packaging (“TFP”) business. This move will accelerate Sonoco’s portfolio optimization strategy and help it focus on core industrial paper and consumer packaging businesses. 

The transaction is expected to close in the first half of 2025. Toppan will pay around $1.8 billion on a cash-free and debt-free basis. Sonoco will use the net proceeds from the deal to repay existing debt.

Details on Sonoco’s TFP Business

On Sept. 4, 2024, Sonoco announced that it commenced a strategic review of its TFP business, which used to be a part of Sonoco’s Consumer Packaging segment. 

The segment’s products consist of rigid packaging (paper, metal and plastic) and flexible packaging. It caters to the consumer staples market focused on food, beverage, household and personal products. This segment accounted for approximately 53% of sales in 2023.

TFP provides complex packaging solutions to various categories including snacks, condiments, healthcare, prepared meals, fresh products, coffee and pets. The business generated revenues of $1.3 billion in 2023, contributing 36% to the Consumer Packaging segment’s revenues and 19% to Sonoco’s total revenues.

SON’s Ongoing Portfolio Strategy to Improve Profitability

To improve the company’s long-term profitability and return capital to its shareholders, Sonoco has been simplifying its business portfolio and focusing on larger and core business units. SON continues to work on commercial, operational and supply-chain excellence programs, intended to shift the mix of its business toward higher-valued products and increase productivity. Its strategic pricing initiatives will also aid results.

On Dec. 4, 2024, the company announced that SON completed its previously declared acquisition of Eviosys from KPS Capital Partners for approximately $3.9 billion. Following the integration process, Eviosys will become a part of SON’s Consumer Packaging segment.

The addition of Eviosys’ highly complementary portfolio will help Sonoco expand its customer base and open up organic growth opportunities in consumer-oriented end markets. This will also boost Sonoco’s innovation and sustainability efforts.

This buyout will strengthen SON’s core metal packaging business and global presence while enhancing sustainability efforts. The company has identified more than $100 million of synergies expected to be realized within two years of closing.

Sonoco Stock’s Price Performance

SON’s shares have lost 9.2% in the past year against the industry’s 18.1% growth.

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SON’s Zacks Rank & Stocks to Consider

SON currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Industrial Products sector are Graham Corporation GHM, Federal Signal Corporation FSS and RBC Bearings Incorporated RBC. GHM sports a Zacks Rank #1 (Strong Buy), while FSS and RBC each has a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Graham Corp. delivered an average trailing four-quarter earnings surprise of 101.85%. The Zacks Consensus Estimate for GHM’s 2024 earnings is pinned at $1.03 per share, which indicates year-over-year growth of 145.2%. The company’s shares have gained 136.8% in a year.

Federal Signal delivered an average trailing four-quarter earnings surprise of 11.8%. The Zacks Consensus Estimate for FSS’ 2024 earnings is pinned at $3.34 per share, which indicates year-over-year growth of 29.5%. The company’s shares have gained 40% in a year.

The Zacks Consensus Estimate for RBC Bearings’ fiscal 2025 earnings is pegged at $9.80 per share. The company delivered a trailing four-quarter average earnings surprise of 2.5%. RBC’s shares have gained 37.5% in a year.

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