Sonoco Products (NYSE:SON) & International Paper (NYSE:IP) Critical Analysis

International Paper (NYSE:IP) and Sonoco Products (NYSE:SON) are both materials companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, dividends, analyst recommendations, earnings and profitability.

Profitability

This table compares International Paper and Sonoco Products’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
International Paper	-14.20%	-1.09%	-0.44%
Sonoco Products	8.41%	16.50%	5.19%

Earnings & Valuation

This table compares International Paper and Sonoco Products”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
International Paper	$24.20 billion	0.90	-$3.52 billion	($6.52)	-6.34
Sonoco Products	$7.46 billion	0.76	$1.00 billion	$6.29	9.14

Sonoco Products has lower revenue, but higher earnings than International Paper. International Paper is trading at a lower price-to-earnings ratio than Sonoco Products, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for International Paper and Sonoco Products, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
International Paper	1	4	9	0	2.57
Sonoco Products	0	7	5	0	2.42

International Paper currently has a consensus target price of $48.75, indicating a potential upside of 18.00%. Sonoco Products has a consensus target price of $61.78, indicating a potential upside of 7.48%. Given International Paper’s stronger consensus rating and higher possible upside, research analysts clearly believe International Paper is more favorable than Sonoco Products.

Insider and Institutional Ownership

81.9% of International Paper shares are held by institutional investors. Comparatively, 77.7% of Sonoco Products shares are held by institutional investors. 0.2% of International Paper shares are held by company insiders. Comparatively, 1.0% of Sonoco Products shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

International Paper pays an annual dividend of $1.85 per share and has a dividend yield of 4.5%. Sonoco Products pays an annual dividend of $2.16 per share and has a dividend yield of 3.8%. International Paper pays out -28.4% of its earnings in the form of a dividend. Sonoco Products pays out 34.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sonoco Products has increased its dividend for 43 consecutive years. International Paper is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

International Paper has a beta of 0.94, meaning that its stock price is 6% less volatile than the S&P 500. Comparatively, Sonoco Products has a beta of 0.37, meaning that its stock price is 63% less volatile than the S&P 500.

Summary

International Paper beats Sonoco Products on 9 of the 17 factors compared between the two stocks.

About International Paper

International Paper Company produces and sells renewable fiber-based packaging and pulp products in North America, Latin America, Europe, and North Africa. It operates through two segments, Industrial Packaging and Global Cellulose Fibers. The company offers linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft; and pulp for a range of applications, such as diapers, towel and tissue products, feminine care, incontinence, and other personal care products, as well as specialty pulps for use in textiles, construction materials, paints, coatings, and others. It sells its products directly to end users and converters, as well as through agents, resellers, and distributors. The company was founded in 1898 and is headquartered in Memphis, Tennessee.

About Sonoco Products

Sonoco Products Company, together with its subsidiaries, designs, develops, manufactures, and sells various engineered and sustainable packaging products in North and South America, Europe, Australia, and Asia. The company operates Consumer Packaging and Industrial Paper Packaging segments. The Consumer Packaging segment offers round and shaped rigid paper, steel, and plastic containers; metal and peelable membrane ends, closures, and components; thermoformed plastic trays and enclosures; and high-barrier flexible packaging products. The Industrial Paper Packaging segment provides paperboard tubes, cones, and cores; paper-based protective packaging products; and uncoated recycled paperboard products. It also offers various packaging materials, including plastic, paper, foam, and other specialty materials. Sonoco Products Company sells its products in various markets, which include paper, textile, film, food, packaging, construction, and wire and cable. The company was founded in 1899 and is headquartered in Hartsville, South Carolina.