Sonoco's Strategic Turnaround and 2026 Growth Potential

Sonoco Products Company (SON) has embarked on a transformative journey in 2025, leveraging strategic acquisitions, divestitures, and operational efficiencies to position itself for long-term growth. With a revised capital structure, a focus on core segments, and a compelling valuation relative to industry peers, the company is emerging as a compelling case study in undervaluation and earnings synergy. This analysis explores Sonoco's financial performance, valuation metrics, and strategic moves to assess its potential for 2026.

Financial Performance: A Foundation for Resilience

Sonoco's third-quarter 2025 results underscored its operational strength. Net sales surged 57.3% year-over-year to $2.1 billion, driven by the acquisition of the Metal Packaging EMEA business and pricing initiatives. Adjusted EBITDA reached $386 million, a 37.3% increase, while the Consumer Packaging segment saw a 117% sales growth and 112% EBITDA expansion. These figures reflect the company's ability to integrate new assets and capitalize on market demand.

However, full-year guidance was revised downward to $5.65–$5.75 in adjusted EPS and $1.3 billion–$1.35 billion in adjusted EBITDA, reflecting "subdued market conditions outside the U.S." Despite this, Sonoco's operating cash flow of $292 million in Q3 and a projected $700 million–$750 million for the year highlight its liquidity and capacity to fund strategic initiatives.

Valuation Metrics: A Case for Undervaluation

Sonoco's valuation appears compelling when compared to industry benchmarks. As of December 2025, the company traded at a trailing P/E ratio of 7.39, significantly below the U.S. packaging industry average of 16.3x–20.9x. Analysts have noted that Sonoco's fair value estimates range from $40.16 to $57.40, well above its recent closing price of $43.32–$45.55. This suggests the market may be underappreciating the company's long-term earnings potential.

The Price-to-Book (P/B) ratio of 1.29 further supports this narrative, indicating the market values Sonoco's equity at a modest premium to its book value. While the Price-to-Sales (P/S) ratio remains undisclosed, the company's revenue growth and margin expansion-particularly in the Consumer Packaging segment-justify a higher multiple.

Strategic Moves: Synergies and Leverage Reduction

Sonoco's strategic focus on simplification and deleveraging has been pivotal. The pending sale of its ThermoSafe business unit for up to $725 million is expected to reduce net leverage to 3.4x, aligning with its target of 3.0x–3.3x by 2026. This divestiture not only streamlines operations but also redirects capital toward core segments, such as Consumer and Industrial Paper Packaging, which are poised for sustained demand.

The acquisition of Eviosys has already delivered $40 million in synergies by Q3 2025, with $100 million in annual savings projected by 2026. By consolidating global metal packaging operations, Sonoco has unlocked procurement and operational efficiencies, driving margin expansion. The Consumer Packaging segment's adjusted EBITDA margin of 18.1% in Q3 2025 exemplifies this progress.

2026 Outlook: A Path to Value Creation

Looking ahead, Sonoco's strategic initiatives are expected to underpin 2026 growth. The company's focus on sustainability-such as developing paper-based alternatives to less sustainable substrates-positions it to capitalize on regulatory and consumer trends. Additionally, the integration of Eviosys and the ThermoSafe sale will enhance capital discipline, enabling reinvestment in high-margin projects.

Analysts project a 12.3% year-over-year increase in EPS for 2026, from $6.10 to $6.85, supported by cost optimization and market share gains. With a target net leverage ratio of 3.0x–3.3x by year-end, Sonoco is poised to balance debt reduction with growth investments, creating a durable competitive advantage.

Conclusion: A Compelling Investment Thesis

Sonoco's strategic turnaround, marked by disciplined capital allocation and operational excellence, has laid the groundwork for 2026 growth. While near-term challenges persist-such as macroeconomic headwinds and integration costs-the company's undervalued metrics, coupled with its long-term earnings synergies, present a compelling case for investors. As Sonoco continues to simplify its portfolio and leverage its core strengths, it is well-positioned to deliver value in an evolving packaging landscape.