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Sealed Air Upgraded to Strong Buy - Analyst Blog
On Dec 14, Zacks Investment Research upgraded
Sealed Air Corporation
) to a Zacks Rank #1 (Strong Buy), as its estimates have been
trending upward after the company reported strong third quarter
fiscal 2014 results and raised its fiscal 2013 outlook on Oct 30.
Why the Upgrade?
Sealed Air's third-quarter adjusted net earnings improved 39% year over year to 39 cents, helped by higher volumes and a positive price/mix. The results beat the Zacks Consensus Estimate of 34 cents per share. In fact, the company has outpaced the consensus estimate in three out of four times, missing it on one occasion. Thus, the average surprise over the last four quarters is 16.6%.
Sealed Air raised its guidance for fiscal 2013 adjusted earnings per share to the range $1.25 to $1.30 from $1.10 to $1.20. Net sales guidance was changed to $7.7 billion as against prior range of $7.7 to $7.9 billion.
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 is expected to realize $90 million of benefits in 2013, of which approximately $71 million has been realized in the first three quarters of 2013. Sealed Air has also announced an additional restructuring plan with projected annualized savings of $80 million by 2015.
Sealed Air will benefit from its 4-9% price increase, which was effective from Nov 1, for most products in its Food Care and Product Care divisions in North America. The price hike is in response to rising polyethylene costs and it may boost the 2014 results if successful.
Sealed Air has agreed to sell its rigid medical packaging business to Milwaukee-based private equity firm Mason Wells for $125 million, as it is no longer considered to be a strategic fit for the company. The proceeds are likely to be utilized to pay back debt and thus reduce interest expense, and thereby contributing to margins.
Earnings estimates have been trending higher over the past 60 days on account of its raised fiscal 2013 forecast. The Zacks Consensus Estimate increased 8% to $1.29 per share for fiscal 2013, while it advanced 5% to $1.54 per share for fiscal 2013 over the same timeframe.
Other Stocks to Consider
Some other stocks worth considering in the sector include Clearwater Paper Corporation ( CLW ), Packaging Corporation of America ( PKG ) and UFP Technologies, Inc. ( UFPT ). While Clearwater holds a Zacks Rank #1 (Strong Buy), Packaging Corporation and UFP Technologies carry a Zacks Rank #2 (Buy).
CLEARWATER PAPR (CLW): Free Stock Analysis Report
PACKAGING CORP (PKG): Free Stock Analysis Report
SEALED AIR CORP (SEE): Free Stock Analysis Report
UFP TECH INC (UFPT): Free Stock Analysis Report
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Zacks Investment Research