Sealed Air Keeps Outperforming

• By Zacks Equity Research
• On 3:11 pm EDT, Wednesday October 28, 2009

Sealed Air Corporation (NYSE: SEE - News) posted third-quarter EPS of 38 cents, beating the Zacks Consensus Estimate of 33 cents as well as prior-year EPS of 28 cents. Through its stringent cost-control measures and global manufacturing strategy, the company managed to offset the impact of lower sales on its earnings.

Net sales declined 11.4% to $1.08 billion from $1.22 billion in the third quarter of 2008. This included a negative impact of 5.9% from foreign currency translation, 4.1% from lower unit volumes and 1.4% from unfavorable product-price mix. The decline in unit volumes was primarily seen in industrial businesses.

Excluding the currency exchange effect, the Food Packaging posted a 4% increase in net sales due to higher unit volumes in North America. The remaining three segments reported lower sales (excluding a negative currency translation impact) due to lower unit volumes in Europe and North America.

However, Sealed Air posted strong margins during the quarter, reflecting the effectiveness of the company's ongoing cost control efforts. Gross margin increased 470 basis points year over year, while operating margin was up 390 basis points. This reflects the benefits of the company's global manufacturing strategy, cost reduction and productivity programs, which together resulted in approximately $20 million of benefits during the quarter.

Sealed Air is pursuing a multi-year global manufacturing strategy to revitalize its bottom line. The company plans to build manufacturing plants close to the markets it serves, with the bulk of production being transferred overseas. Apart from its global manufacturing strategy, the company is also aggressively managing its overhead costs.

Sealed Air raised its full year earnings guidance to $1.37 - $1.45 from the previous guidance of $1.25 - $1.45. The company expects to continue to realize benefits from its cost reduction and productivity programs in the fourth quarter.

Other packaging companies, Sonoco Products Company (NYSE: SON - News) and Pactiv Corp. (NYSE: PTV - News) also reported better-than-expected third quarter earnings and raised their full year earnings estimates.

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