Exchange On-line is not resolving SMTP addresses to the proper Display Name if that sender is located in the cloud's GAL/AD. This is occurring for both Outlook and OWA clients.
Steps to Reproduce:
Compose a message in Lotus Notes, addressed to an Office 365 user. The message is received in Outlook or OWA but the name appears as the SMTP address, not the display name. See screen shots below:
When this type of issue occurs in an on-premise coexistence environment, the root cause is due to an incorrect configuration in the receive connector with the Exchange Hub Transporter for the inbound domain, in this case, "service.sonoco.com". Here is a screen shot of an Exchange server's receive connector configured in this manner.
The connection is considered externally secured by using a security mechanism that's external to Exchange. The connection may be an Internet Protocol security (IPsec) association or a virtual private network (VPN). Alternatively, the servers may reside in a trusted physically controlled network. The ExternalAuthoritative authentication method requires the ExchangeServers permission group. This combination of authentication method and security group permits the resolution of anonymous sender e-mail addresses for messages that are received through this connector. This replaces the Resolve anonymous senders function in Exchange Server 2003.