Sealed Air Bets on Innovation, Restructuring & Strong Demand

On Sep 6, we issued an updated research report on Sealed Air Corporation SEE. The company is poised to gain on innovative products, Reinvent SEE Strategy, restructuring programs, growth in fresh food and e-commerce markets, and acquisitions.

Upbeat Outlook for 2019

Sealed Air anticipates net sales at around $4.85 billion for fiscal 2019, which indicates year-over-year growth of 2% on reported basis and 5% in constant dollars. Acquisitions are expected to contribute an improvement of 4% in revenues. Adjusted EBITDA in 2019 is estimated to lie between $950 million and $960 million compared with $890 million reported in 2018. The company projects adjusted earnings per share at $2.70-$2.80.

The Zacks Consensus Estimate for Sealed Air’s earnings per share for fiscal 2019 is $2.78 and the same for revenues is $4.83 billion. The estimate for revenues and earnings per share indicates year-over-year growth of 2.04% and 11.2%, respectively.

Savings from Restructuring to Aid Margins

In December 2018, Sealed Air announced a reformation plan — Reinvent SEE Strategy — along with a fresh restructuring program, in a move to drive growth and earnings. The new strategy is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements. One of most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets.

Sealed Air will combine the new program with its ongoing restructuring program. Both the programs are likely to lead to total annualized savings of $240-$260 million from 2019 through 2021.

Acquisitions to Bolster Results

Sealed Air’s acquisition of Automated Packaging Systems, Inc., a leading manufacturer of high-reliability, automated bagging systems, expands breadth of the company’s automated solutions and sustainable packaging offerings. The previous buyout of AFP, Inc. expanded Sealed Air’s protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications.

The company had also acquired Fagerdala, to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication, and commercial organization to improve sales in the consumer electronics, medical equipment and devices, automotive, temperature assurance, and e-commerce fulfillment sectors. AFP and Fagerdala align well with the ship-in-own-container (SIOC) trend in e-commerce. This trend is transforming e-commerce packaging as more distributors want manufacturers to have their primary packaging parcel ready.

Poised Well For the Long Run

Sealed Air’s revenues witnessed a compounded annual growth rate of 2% over the last three years, ended 2018. The company’s top line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations, strong fresh food markets and e-commerce activities. The company is witnessing increased demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity. Further, ongoing momentum in high-growth geographies such as Brazil, Russia, China and Southeast Asia will continue as demand increases for packaged proteins and convenience meals.

Expected benefits from reducing costs, driving operational excellence and commercializing new innovations along with favorable global business trends position the company well for improved margins. The company has an estimated long-term earnings growth rate of 10.2%, ahead of the industry’s 8.4%.

So far this year, shares of Sealed Air have gained 13.9% against the industry 's decline of 23.7%.

Zacks Rank & Other Stocks to Consider

Sealed Air currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Industrial Products sector are John Bean Technologies Corporation JBT, Zebra Technologies Corporation ZBRA and Hickok Inc. CRAWA.  All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

John Bean Technologies Corporation has expected earnings growth rate of 12.97% for 2019. The company's shares have rallied 47% so far this year.

Zebra Technologies has expected earnings growth rate of 16.71% for 2019.  The stock has appreciated 27% year to date.

Hickok has expected earnings growth rate of 36.18% for 2019. Year to date, the company’s shares have surged 81%.

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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.

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