Sealed Air Corporation
) reported first-quarter 2012 adjusted net earnings of 18 cents per
share, missing the Zacks Consensus Estimate of 21 cents and lagging
behind the year-ago quarter's earnings of 34 cents.
On a reported basis, the company had a loss of 3 cents per share
compared with earnings of 34 cents.
Total revenues jumped 70% year over year to $1.92 billion,
beating the Zacks Consensus Estimate of $1.91 million. Acquisitions
contributed 66% to the growth while the balance was derived from
price mix (2%) and volumes (2%).
Cost and Margins
Cost of sales increased 55% year over year to $1.27 million in
the quarter. Gross profit jumped 110.3% to $649.7 million.
Consequently, gross margin soared 650 basis points (bps) to 33.9%
in the quarter.
Marketing, administrative and development expenses increased at
a whopping rate of 160.5% to $478.1 million in the quarter.
Adjusted operating profit increased 22.2% to $150.7 million.
However, adjusted operating margin contracted 300 bps to 7.9%.
Food Packaging Segment:
Net sales increased 3% year over year to $488.2 million, up 2% on
constant dollar basis with a 2% contribution from price mix. Global
volumes increased due to growth in Australia/New Zealand and EMEA
partially offset by growth in North America and unfavorable impact
of currency translation. Adjusted operating profit increased 4.5%
to $65.4 million in the quarter.
Food Solutions Segment:
Net sales were $238.2 million, up 4% on reported and constant
dollar basis. Price mix contributed 3% and volumes 1%. Adjusted
operating profit increased 37.1% to $26.6 million.
Protective Packaging Segment:
The segment reported net sales of $345.6 million, up 3% (or 4% on a
constant dollar basis). Volumes contributed 3%. Adjusted operating
profit increased 15.9% to $46.7 million in the quarter.
Net sales were $750.9 million in the quarter. Adjusted operating
profit was $3.7 million compared to $1 million a year ago.
Cash and cash equivalents were $538.5 million as of March 31,
2012, compared with $722.8 million as of December 31, 2011.
Long-term debt excluding current portion amounted to $4.99 billion
as of March 31, 2012, compared to $5.01 billion as of December 31,
Free cash flows were $29.8 million during the first quarter
versus $56.3 million a year ago. Capital expenditure was $29.2
million in the quarter compared to $19.5 million in the prior-year
Debt-to-capitalization ratio improved to 62.2% as of March 31,
2012, compared with 63.1% as of December 31, 2011.
Outlook for 2012
The company expects adjusted earnings in the range of
$1.50-$1.60 per share and cash earnings in the range of $2.10-$2.20
per share. Net sales are expected to remain at the lower end of the
previous guidance of $8.2-$8.3 billion.
Further, free cash flows are expected in the range of $450-$475
million and net debt target is pegged at $4.9 million. The company
expects adjusted EBITDA of $1.2 billion.
With the Diversey acquisition, Sealed Air expanded its presence
beyond specialty packaging solutions. This combination is expected
to further enhance Sealed Air's earnings per share and free cash
flow generation. However, the ongoing weakness in the European
economy has made the situation challenging as it has significant
exposure to the European market. Sealed Air faces competition from
Sonoco Products Co.
Currently, we have a long-term Neutral recommendation on Sealed
Air. The stock retains a short-term Zacks #4 Rank (Sell).
BEMIS (BMS): Free Stock Analysis Report
SEALED AIR CORP (SEE): Free Stock Analysis
SONOCO PRODUCTS (SON): Free Stock Analysis
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