Jeferies Raises Target 9% on Sonoco (SON) to $35; Sees Tegrant as 'Value-Add' Acquisition
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Price: $56.55 +0.28%
Rating Summary:
5 Buy, 12 Hold, 3 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 15 | Down: 11 | New: 13
Rating Summary:
5 Buy, 12 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 15 | Down: 11 | New: 13
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Jeferies boosts its price target on Sonoco Products (NYSE: SON) by 9.4 percent from $32 previous to a new mark of $35 following the recent acquisition of Tegrant. Jefferies maintains a Hold rating on Sonoco.
Following the close of the Tegrant acquisition, Jefferies is raising it's fiscla 2012 EPS estimate from $2.49 to $2.60. The move relects both accretion from the acquisition, as well as cost tailwind from lower OCC prices.
On financing, Jefferies comments, "Sonoco financed the deal by issuing $500 million of senior unsecured notes consisted of $250 million of 4.375% 2021 notes and $250 million of 5.75% notes due 2040. Additionally, it entered into a $150 million term loan agreement (3 year treasury + 125 bps), with the blended cost of borrowing at 4.3%. Even with the incremental $650 million of debt, Sonoco's balance sheet is still in great shape (net debt: EBITDA: 1.9x) and it should be able to delever quickly from its strong FCF profile...Now that we have had more time to study Tegrant, the business appears to be more value-add than the traditional protective packaging business we had in mind."
As for lower OCC prices, Jefferies said its "now assuming operating margins in tubes & core are flat YOY in 2012, with the cost relief being partially offset by lower volumes. While the macro picture will play a large role in determining OCC prices, our checks indicate that demand for recycled fiber is expected to pickup (demand coming from China), which will likely limit downside to OCC prices from current levels."
Expected 2012 revenue now moves from $4.564 billion to $4.963 billion.
For an analyst ratings summary and ratings history on Sonoco Products click here. For more ratings news on Sonoco Products click here.
Shares of Sonoco Products closed at $31.29 yesterday.
Following the close of the Tegrant acquisition, Jefferies is raising it's fiscla 2012 EPS estimate from $2.49 to $2.60. The move relects both accretion from the acquisition, as well as cost tailwind from lower OCC prices.
On financing, Jefferies comments, "Sonoco financed the deal by issuing $500 million of senior unsecured notes consisted of $250 million of 4.375% 2021 notes and $250 million of 5.75% notes due 2040. Additionally, it entered into a $150 million term loan agreement (3 year treasury + 125 bps), with the blended cost of borrowing at 4.3%. Even with the incremental $650 million of debt, Sonoco's balance sheet is still in great shape (net debt: EBITDA: 1.9x) and it should be able to delever quickly from its strong FCF profile...Now that we have had more time to study Tegrant, the business appears to be more value-add than the traditional protective packaging business we had in mind."
As for lower OCC prices, Jefferies said its "now assuming operating margins in tubes & core are flat YOY in 2012, with the cost relief being partially offset by lower volumes. While the macro picture will play a large role in determining OCC prices, our checks indicate that demand for recycled fiber is expected to pickup (demand coming from China), which will likely limit downside to OCC prices from current levels."
Expected 2012 revenue now moves from $4.564 billion to $4.963 billion.
For an analyst ratings summary and ratings history on Sonoco Products click here. For more ratings news on Sonoco Products click here.
Shares of Sonoco Products closed at $31.29 yesterday.
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