Sealed Air Hits a New 52-Week High on Strong Fundamentals - Analyst Blog
Shares of Sealed Air Corporation SEE hit a new 52-week high of $52.96 on Jul 14, 2015 and eventually closed a notch lower at $52.80. Sealed Air has delivered a solid one-year return of about 61% and year-to-date return of around 25.1%, outperforming the S&P 500. Average volume of shares traded over the last three months is approximately 1859K. This New Jersey-based provider of specialty packaging service has a market cap of $11.10 billion.
Sealed Air’s Strengths
Sealed Air increased the prices for majority of its European Product Care and Food Care division packaging products by up to 5%, which came into effect from Jul 1, 2015. This is in response to continued escalation in the price of key raw materials, particularly polyethylene, polypropylene and polystyrene as all major petrochemical suppliers increased prices over the last five months, and other input costs.
Sealed Air’s share price has been on the rise since it reported first-quarter 2015 results on Apr 30. Adjusted earnings rose 64% year over year to 54 cents per share. For 2015, the company expects net sales to be approximately $7.1 billion. Adjusted earnings per share are currently projected in the range of $2.08 to $2.15.
Sealed Air’s sustained focus on adding new products, value added selling, operational discipline and earnings quality improvement efforts will enhance its performance in 2015. The company also expects to generate approximately $575 million in free cash flow in the year. Further, Sealed Air will benefit from cost savings from its ongoing Earnings Quality Improvement Program (EQIP) and Integration and Optimization Program (IOP).
During the first quarter, Sealed Air entered into a cross-currency swap for U.S.-based debt to euro-denominated, increasing its euro-based debt exposure to 14% from the previous 4% level. This transaction, combined with higher cash balances, reduces its cash interest payments for the year to $240 million from its previous expectation of $255 million.
Furthermore, in a bid to expand its floor cleaning business, Sealed Air acquired Intellibot Robotics LLC. Intellibot Robotics is a U.S.-based privately owned company that has pioneered the development of robotic commercial floor cleaning machines. The business will be integrated into Sealed Air’s Diversey Care division and its leading brand of TASKI floor cleaning machines. The combination of Intellibot Robotics' expertise and Diversey Care's TASKI mechanical cleaning leadership will accelerate the growth of robotics and what is known as the Internet of Things in the floor cleaning market.
Sealed Air sold its North American trays and absorbent pad business to NOVIPAX, a portfolio company of Atlas Holdings LLC. A noncore asset within the Food Care division, this business generated below 10% profit margin and was becoming quickly commoditized. It also faced significant competitive pricing pressures. The sale proceeds will fund approximately two-thirds of the capital investment required for Sealed Air’s new state-of-the-art global headquarters that will be home to its three divisional headquarters and the largest R&D center.
Further, the estimates for Sealed Air have moved upward in the past 60 days. The Zacks Consensus Estimate for 2015 increased about 2% to $2.16 per share and for 2016 the same rose by 3% to $2.49 per share.
Sealed Air currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other favorably ranked stocks in the same sector include Rexam plc REXMY, Fibria Celulose SA FBR and Sappi Limited SPPJY. All of these stocks hold a Zacks Rank #2.
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