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7 Solid Reasons to Retain Sealed Air in Your Portfolio Now

Zacks Equity Research
Ashford Hospitality Trust (AHT) is likely to gain in Q1 from its high-quality, well-diversified portfolio, asset-management efforts and accretive transactions.

Sealed Air Corporation SEE is likely to benefit from its Reinvent SEE Strategy, restructuring programs, growing demand in fresh food and e-commerce markets, and acquisitions.

 

Shares of this Zacks Rank #3 (Hold) company have gained 19% in the past three months. With the stock price appreciation and a Value Score of B, it seems to be a stock that investors should retain in their portfolios now.  Moreover, it looks promising and is poised to carry the momentum ahead, driven by the following factors.

 

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. The strategy will help the company deal with critical packaging challenges, in turn, improving customer services. 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 throughout 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 will be concluded by the end of 2021. Both the programs are likely to lead to total annualized savings of $240-$260 million from 2019 through 2021. In 2019, total annualized savings from both programs are expected to be approximately $70 million.

 

Acquisitions to be Catalysts: The company recently acquired AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions. The buyout expands Sealed Air's protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. The acquisition complements the Fagerdala buyout which was completed in 2017. The company had acquired Fagerdala to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication. It will help Sealed Air 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.

 

Upbeat Outlook for 2019: For fiscal 2019, Sealed Air anticipates net sales at $4.8 billion, reflecting year-over-year growth at approximately 2% on as reported basis and 5% in constant dollars. The company forecasts adjusted EPS to be in the range of $2.65 to $2.75 compared with the $2.50 reported in 2018. Sealed Air's top line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations, strong fresh food markets and the e-commerce sector. The company is witnessing increased demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity.

 

The Zacks Consensus Estimate for earnings per share is at 57 cents, projecting year over year growth of 11.8%. The Zacks Consensus Estimate for revenues is currently pegged at $4.81 billion, reflecting year over year growth of 1.7%. 

 

Estimates Northbound: 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 6.47%,

 

Zacks Rank & Stocks to Consider

 

A few better-ranked stocks in the Industrial Products sector are Axon Enterprise, Inc AAXN, Alarm.com Holdings, Inc. ALRM and Ennis, Inc. EBF, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Axon has expected earnings growth rate of 14.5% for 2019.

 

Alarm.com has expected earnings growth rate of 7.8% for 2019.

 

Ennis has expected earnings growth rate of 13.9% for 2019.

 

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Sealed Air Corporation (SEE) : Free Stock Analysis Report
 
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