Shares of Sealed Air Corporation (SEE) have outperformed the S&P 500 on a year-to-date basis, driven by Reinvent SEE Strategy, expected savings from restructuring programs, and growing demand in fresh food and e-commerce markets. The stock has gained 27.1% compared with the S&P 500's growth of 11.8%.
Sealed Air, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $6.9 billion. The company has expected long-term earnings per share growth of 8.9%. Additionally, Sealed Air has an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores.
Let's delve deeper and analyze the reasons behind the company's impressive price performance and find out if there is room for further appreciation:
Sealed Air Corporation Price
Strong Outlook: For fiscal 2019, the company anticipates net sales of $4.8 billion, reflecting year-over-year growth of approximately 2% on reported basis and 5% in constant dollars. The company's sales came in at $4.73 billion in fiscal 2018. While the Food Care segment's sales are expected to grow 4%, the Product Care segment is anticipated to advance 5.5%. Adjusted EBITDA from continuing operations is expected to be $925-$945 million for fiscal 2019, up 4-6% from adjusted EBITDA of $890 million in fiscal 2018. The company forecasts adjusted EPS to be in the range of $2.65 to $2.75. In fiscal 2018, Sealed Air's adjusted EPS was $2.50.
Healthy Growth Projections: For fiscal 2019, the Zacks Consensus Estimate for earnings per share is pegged at $2.72, projecting year-over-year growth of 8.8% while the same for 2020 exhibits a rise of 9.8% to $2.99. Further, the Zacks Consensus Estimate for earnings for both 2019 and 2020 have moved up 2% over the past 90 days.
Positive Earnings Surprise History: The company has surpassed estimates in the trailing four quarters, recording an impressive average positive earnings surprise of 6.49%.
Reinvent SEE Strategy to be a Game Changer: 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. This step will double Sealed Air's innovation rate over the next five years. The company also aims at simplifying its operational structure and expanding SEE Operational Excellence by upgrading end-to-end processes across the company.
Focus on Strong Demand in Fresh food and E-commerce: With the aid of its strategy, Sealed Air will be able to drive market share in existing and adjacent markets by leveraging the company's extensive distribution network. It will continue to invest in digital systems and processes, in order to enhance cycle time and awareness. Consequently, the new strategy will fuel Sealed Air's growth by supporting packaging innovations for fresh food and e-commerce, and increasing operating leverage target above 40% per year, beginning in 2019.
Restructuring Efforts to Bear Fruit: Sealed Air's Reinvent SEE strategy includes a new three-year restructuring program that is anticipated to drive total annualized savings in the range of $215 million to $235 million by the end of 2021. Of this, approximately $45 million is projected to be realized in 2019.
The company will combine the new program with its ongoing restructuring program. The existing program will be completed this year while the new program is anticipated to conclude by the end of 2021. Both the programs are likely to lead to total annualized savings of $240-$260 million from 2019 through 2021. Total annualized savings from both programs are expected to be approximately $70 million in 2019.
Stocks to Consider
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Mueller Industries has expected earnings growth rate of 2.2% for 2019.
Alarm.com has expected earnings growth rate of 7.8% for the current year.
Albany International has expected earnings growth rate of 44.7% for 2019.
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