On Jul 19, we maintained our Neutral recommendation on
Sealed Air Corporation
) based on expected benefits from its restructuring programs,
leadership changes and recent implementation of price increases
that will help counter material cost increases and rising
inflation in the second quarter. However, increase in costs due
to restructuring, and increase in debt and integration risks due
to the Diversey acquisition remain concerns for this specialty
packaging service provider.
GRAPHIC PKG HLD (GPK): Free Stock Analysis
MOBILE MINI INC (MINI): Free Stock Analysis
PACKAGING CORP (PKG): Free Stock Analysis
SEALED AIR CORP (SEE): Free Stock Analysis
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Sealed Air's first-quarter adjusted net earnings increased 6% to
17 cents per share. Volume in the Food & Beverage segment
moved higher due to strong growth in emerging markets.
Adjusted EBITDA benefited from higher volumes, operational
efficiencies and reduced expenses. The company expects the recent
implementation of price increases to counter material cost
increases and rising inflation in the second quarter.
However, the Institutional & Laundry segment continued to be
affected from significant exposure to Europe. The segment has the
largest exposure to Europe among all Sealed Air's divisions, with
almost half of its sales generated from this region. Overall,
Sealed Air generates 33% of its total sales from the European
region. With no significant improvement in the economic
conditions in sight, we believe results will continue to be
Sealed Air's Integration & Optimization Program will generate
cost savings and benefits of approximately $195 million to $200
million by the end of 2014. The company announced an additional
restructuring plan with projected annualized savings of $80
million by 2015. On the flipside, the additional restructuring
plan will increase Sealed Air's costs by $180 million to $200
million by 2015, including $65 million in 2013.
The Diversey acquisition in 2011 is the second largest in the
company's history, just behind the $4.8 billion purchase of the
Cryovac food-packaging business in 1998 from W.R. Grace & Co.
The integration of Diversey is not yet complete and given the
size of the deal, we are apprehensive of integration risks. Even
though Diversey has added to the company's growth profile, it
also raised its risk due to the high levels of debt the company
has incurred to fund the acquisition.
Other Stocks to Consider
Other stocks with favorable Zacks Rank in the same industry are
Mobile Mini, Inc.
Graphic Packaging Holding Company
) with a Zacks Rank #1 (Strong Buy), and
Packaging Corporation of America
) with a Zacks Rank #2 (Buy).