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Sealed Air Beats Q4 Earnings Estimates, Issues 2016 Outlook

Sealed Air Corporation 's SEE fourth-quarter 2015 adjusted earnings per share of 70 cents increased 29% year over year. The figure also surpassed the Zacks Consensus Estimate of 50 cents, delivering a positive surprise of 52%.

Including special items, viz. restructuring and other associated costs, earnings came in at 62 cents per share compared with 31 cents per share in the year-ago quarter.

Total revenues declined 11% on a reported basis to $1.754 billion in the quarter. Revenues missed the Zacks Consensus Estimate of $1.772 billion. On a constant dollar basis, net sales declined 1.5%. Currency had a negative impact of $190 million on net sales. Food Care related divestitures also had a negative impact on net sales in the quarter. Adjusting for these items, organic net sales growth was 1.7% in the quarter.

Region-wise, sales were led by 7% growth in Latin America, followed by 2.8% growth in EAME. Sales in Asia Pacific were flat while sales in North America edged down 0.1%.

Cost and Margins

Cost of sales declined 14% year over year to $1.12 billion. Gross profit declined 5% year over year to $637 million. Gross margin expanded 220 basis points (bps) year over year to 36.3% in the quarter.

SG&A expenses decreased 12% to $409 million from $464 million in the prior-year period. Adjusted operating profit increased 8% year over year to $216 million. Operating margin improved 220 bps to 12.3%.

Adjusted earnings before interest, taxes and depreciation and amortization (EBITDA) remained flat at $282 million with the year-ago quarter. Adjusted EBITDA margin however expanded 180 bps year over year to 16.1% driven by a favorable mix and price/cost spread, as well as cost synergies, partially offset by unfavorable currency translation and the impact of divestitures.

Segment Performance

Food Care : Net sales in this segment went down 15% year over year to $842 million. Adjusted EBITDA decreased 8.7% year over year to $157 million.

Diversey Care : In this segment, net sales were $495 million, down 8% year over year on a reported basis. Adjusted EBITDA decreased 5% to $55 million from $58 million.

Product Care : The segment reported net sales of $398 million, down 8% year over year on a reported basis. Adjusted EBITDA increased 11% year over year to $85 million.

Financial Updates

Cash and cash equivalents were $358 million as of Dec 31, 2015, up from $322.6 million as of Dec 31, 2014. Cash flow from operating activities in 2015 was $968 million as against usage of $215 million in the prior year. In Mar 2015, the company received a tax refund of $235 million related to a settlement agreement payment. Excluding the tax refund, cash flow from operating activities in 2015 came in at $733 million, against cash used by operating activities of $215 million in the prior year.

During the year, Sealed Air repurchased approximately 16.1 million shares of its common stock for approximately $802 million. As of Dec 31, 2015, the average diluted shares outstanding were 207 million as compared to 214 million as of Dec 31, 2014.

Free cash flow was an inflow of $595 million in 2015 unlike usage of $599 million in 2014. The company's net debt increased to $4.2 billion as of Dec 31, 2015, from $4.1 billion as of Dec 31, 2014. The increase was mainly due to payment for share repurchases and dividends, offset by cash reflecting the tax refund related to the settlement agreement payment and cash generated from operating activities.

Full-Year Performance

Sealed Air reported adjusted earnings per share of $2.59 in 2015, up from $1.86 in the prior year. Earnings were ahead of the Zacks Consensus Estimate of $2.34. Sealed Air had expected adjusted earnings per share at around $2.32. Including one-time items, the company reported earnings per share of $1.62 compared with $1.20 in the prior year.

Revenues declined 9% year over year to $7,031 million, short of the Zacks Consensus Estimate of $7,043 million. For 2015, Sealed Air had guided net sales to be approximately $7 billion.

Guidance

For 2016, Sealed Air expects net sales to be approximately $6.8 billion. This is based on the assumption of an unfavorable impact of approximately $400 million or 6% from foreign currency translation. Adjusted for unfavorable currency and a $102 million decline related to 2015 divestitures, net sales are expected to increase approximately 3.5% on an organic basis.

Adjusted EBITDA is estimated to be in the range of $1.17 billion to $1.19 billion, which assumes $65 million of unfavorable currency translation. On an organic basis, adjusted EBITDA is expected to increase in the range of 7% to 9%.

Sealed Air guides adjusted EPS in the range of $2.52 to $2.60. The outlook assumes an adjusted tax rate of 24%.

Free cash flow is projected at approximately $550 million that includes capital expenditures of approximately $275 million and cash restructuring payments of approximately $110 million.

Peer Performance

Owens-Illinois, Inc.'s OI fourth-quarter 2015 adjusted earnings per share of 40 cents per share came in line with the Zacks Consensus Estimate and increased 25% year over year on a constant currency basis.

Bemis Company, Inc.'s BMS fourth quarter adjusted earnings rose 5% year over year to 60 cents per share, beating the Zacks Consensus Estimate by a penny.

AptarGroup, Inc. ATR reported record fourth-quarter 2015 earnings per share of 67 cents, which improved 18% year over year from 57 cents per share. Earnings surpassed the company's guidance range of 61 cents to 66 cents and also came in ahead of the Zacks Consensus Estimate of 64 cents.

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SEALED AIR CORP (SEE): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

APTARGROUP INC (ATR): Free Stock Analysis Report

OWENS-ILLINOIS (OI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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