Shares of Sealed Air Corporation (SEE) hit a new 52-week high of $34.37 during yesterday’s trading session before closing at $34.13. This was Sealed Air’s second consecutive trading session wherein it touched a 52-week high. The Elmwood Park, NJ-based specialty packaging service provider surpassed the previous high of $34.13 on Dec 27. The company has delivered an impressive one-year return of about 98.8% and year-to-date return of 100%, outperforming the S&P 500.
Sealed Air has had a solid run in 2013, ranging from a 52-week low on to $17.78 on Jan 2 to a 52 week high on Dec 31. The company has long-term estimated earnings per share growth rate of 11.7%. Average volume of shares traded over the last three months is approximately 1559K.
What’s Driving Sealed Air Upward?
The announcement on Dec 24 that W.R. Grace & Co. (GRA) is emerging from a bankruptcy after 12 years has been a major catalyst for Sealed Air. Maryland-based W.R. Grace had filed for bankruptcy in 2001 under a wave of asbestos-related lawsuits. This development will boost Sealed Air shares as it finalizes any asbestos litigation on the company and will result in a tax benefit. Furthermore, this will be accretive to the company's earnings next year.
Sealed Air’s share prices showed an upward trend as the company delivered improved first and second quarter results. Share prices entered the $30 range following its third quarter results and upbeat guidance on Oct 30. Sealed Air’s third-quarter adjusted net earnings improved 39% year over year to 39 cents, helped by higher volumes and a positive price/mix. Sealed Air raised its guidance for fiscal 2013 adjusted earnings per share to the range $1.25 to $1.30 from $1.10 to $1.20.
Sealed Air shares have also benefited from the expectation that its 2014 results will benefit from its 4-9% price increase (effective from Nov 1, for most products in its Food Care and Product Care divisions in North America) in response to rising polyethylene costs. Furthermore, savings and benefits of approximately $195 million to $200 million are expected by the end of 2014 from its Integration & Optimization Program. The projected annualized savings of $80 million by 2015 is also a favorable signal.
Furthermore, the market has reacted favorably to Sealed Air’s divestiture of its rigid medical packaging business for $125 million, as it is no longer considered to be a strategic fit for the company. The proceeds are likely to be utilized to pay back debt and thus reduce interest expense, and thereby contributing to margins.
Other Stocks to Consider
Sealed Air currently retains a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the sector include Packaging Corporation of America (PKG) and UFP Technologies, Inc. (UFPT). While Packaging Corporation holds a Zacks Rank #1 (Strong Buy), UFP Technologies carries a Zacks Rank #2 (Buy).