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Sealed Air (SEE) Earnings and Sales Surpass Estimates in Q4

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Zacks Equity Research
·5 min read
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Sealed Air Corporation SEE reported fourth-quarter 2020 adjusted earnings per share of 89 cents, surpassing the Zacks Consensus Estimate of 79 cents. The bottom line also improved 14% year over year on higher volumes and benefits from the company’s Reinvent SEE initiatives, somewhat offset by higher input and operating costs.

Including special items, the company delivered net earnings per share of 88 cents compared with the prior-year quarter figure of 80 cents.

Total revenues were up 3% year over year to $1.34 billion in the reported quarter with favorable sales and volume trends across all regions. Further, the top line beat the Zacks Consensus Estimate of $1.30 billion.

Sealed Air Corporation Price, Consensus and EPS Surprise

Sealed Air Corporation Price, Consensus and EPS Surprise
Sealed Air Corporation Price, Consensus and EPS Surprise

Sealed Air Corporation price-consensus-eps-surprise-chart | Sealed Air Corporation Quote

Cost and Margins

Cost of sales went up 5% year over year to $917 million. Gross profit declined 1% year over year to $424 million. Gross margin contracted 140 basis points to 31.7% compared with the prior-year quarter’s 33.1%.

SG&A expenses fell 10% to $195 million year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $279 million in the quarter, up 3% from the prior-year quarter. Adjusted EBITDA margin was 20.8% compared with the prior-year quarter’s 20.9%. Benefits from higher volume and Reinvent SEE initiatives were partially offset by higher input and operating costs.

Segment Performance

Food: Net sales decreased 0.3% year over year to $757 million. Adjusted EBITDA was down 1% year over year to $169.7 million. Strength in food retail and automated equipment was partially negated by continued weakness in food service due to the impact of COVID-19, leading to declines in both sales and adjusted EBITDA in the reported quarter.

Protective: The segment reported net sales of $584 million in the reported quarter, up 8% from the prior-year quarter led by continued strength in e-Commerce, fulfillment and automated equipment. Adjusted EBITDA climbed 8% year over year to $115 million driven by volume growth and Reinvent SEE benefits. However, this was somewhat mitigated by higher input and operating costs.

Financial Updates

Cash and cash equivalents were around $549 million as of Dec 31, 2020, up from the $262 million as of Dec 31, 2019. Cash flow from operating activities was around $737 million in 2020 compared with $511 million in the prior year driven by higher earnings. During 2020, Sealed Air paid cash dividends of around $100 million and made share repurchases worth $33 million. As of Dec 31, 2020, the company had $675 million remaining under the current share repurchase program authorization.

As of Dec 31, 2020, Sealed Air’s net debt was $3.2 billion, down from $3.6 billion as of Dec 31, 2019. As of 2020-end, Sealed Air had approximately $1.7 billion of liquidity available, which comprised $549 million in cash and $1,146 million of undrawn, committed credit facilities.

2020 Results

Sealed Air’s adjusted earnings per share in 2020 was $3.19, up 13% from the prior-year’s figure of $2.82. The bottom line surpassed the Zacks Consensus Estimate of $3.09. Including one-time items, the company delivered earnings per share of $3.10 in 2020 compared with $1.89 in 2019.

Sales were up 2% year over year to $4.9 billion from the prior-year figure of $4.79 billion. The top line beat the Zacks Consensus Estimate of $4.86 billion.

2021 Guidance

For 2021, Sealed Air expects net sales in the range of $5.1 billion to $5.2 billion. This indicates an increase of 4.5% to 6.5% growth as reported and 2.5% to 4.5% in constant dollars.

Adjusted EBITDA is projected between $1.10 billion and $1.13 billion in 2021 compared with $1.05 billion in 2020. Foreign currency is expected to have a favorable impact of 2% on EBITDA. Adjusted earnings per share is now anticipated in the band of $3.25-$3.40. The mid-point of the range suggests year-over-year growth of 4%.

Free cash flow is estimated between $500 million and $550 million. The company plans capital expenditures of around $210 million for the year and Reinvent SEE restructuring, and associated payments of around $40 million.

Share Price Performance

Over the past year, Sealed Air’s shares have gained 22.6%, outperforming the industry’s rally of 20.9%.

Zacks Rank and Other Stocks to Consider

Sealed Air carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the Industrial Products sector include AGCO Corporation AGCO, Avery Dennison Corporation AVY and AptarGroup, Inc. ATR. While AGCO Corporation currently sports a Zacks Rank #1, Avery Dennison and AptarGroup carry a Zacks Rank #2.

AGCO Corporation has a projected earnings growth rate of 11.4% for the current year. Shares of the company have soared 83% over the past year.

Avery Dennison has an estimated earnings growth rate of 8.8% for 2021. The company’s shares have rallied 28% in a year’s time.

AptarGroup has an expected earnings growth rate of 14.4% for the ongoing year. Over the past year, the stock has gained 23%.

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