Sealed Air (SEE) Hits 52-Week High: Can the Run Continue?
Shares of Sealed Air Corporation SEE attained a fresh 52-week high of $61.27 on Aug 26 trading session, before retracting to close at $60.67. Solid second-quarter 2021 results, ongoing strength in demand in its end markets, upbeat outlook for 2021 and anticipated benefits from its Reinvent SEE Strategy on earnings are primary reasons behind the rally. Sealed Air’s recent announcement that it has received notification from the Securities and Exchange Commission that the previously disclosed investigation against the company has been concluded also contributed to the upside.
The company has a market capitalization of around $9 billion. Sealed Air has an expected long-term earnings per share growth rate of 9.6%. The company has a trailing four-quarter earnings surprise of 10.9%, on average.
Sealed Air’s current-year earnings estimates have been revised upward by 1% to $3.55 per share over the past 30 days, reflecting analysts’ optimism. Meanwhile, the same for 2022 has moved north by 4% to $4.06 per share. The Zacks Consensus Estimate for earnings for 2021 and 2022 suggests year-over-year growth of 11.3% and 14.4%, respectively.
Share Price Performance
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The stock has gained 48.5% in the past year, compared with the industry’s growth of 29.4%. The S&P500 has rallied 29.6% in the same time frame.
Key Catalysts
Improved Q2 Results: Sealed Air’s second-quarter 2021 adjusted earnings per share increased 4% year over year to 79 cents. Revenues were up 15% to $1.33 billion, highlighting healthy demand for automated and sustainable packaging solutions.
Upbeat 2021 Guidance: For 2021, Sealed Air expects net sales in the range of $5.4 billion to $5.5 billion. This indicates an increase of 10% to 12% as reported and 8% to 10% in constant dollars. Adjusted EBITDA is projected between $1.12 billion and $1.15 billion in 2021. Adjusted earnings per share is now anticipated in the band of $3.45 to $3.60. The mid-point of the range suggests year-over-year growth of 11%.
Price Hikes to Combat Cost Inflation: The company recently announced that it will raise prices by 5% to 10% across all products effective Sep 15, 2021. This will help counter the impact of rising input costs.
Solid Demand Bodes Well: Strong demand for automated equipment and sustainable packaging solutions continue to drive growth in food and protected packaging segments. In food, the retail channel and protein exports are expected to remain strong. Sealed Air has been witnessing higher food service demand compared to last year owing to reopening of restaurants and other public venues. In fact, its fluid solutions portfolio, which comprises Cryovac Barrier Bags and pouches for condiments, soups and sauces, is witnessing growth on demand rebound. The Food segment’s 50% of sales are generated from these categories. In protective, continued growth in e-commerce and fulfillment, and higher demand in industrial end markets are likely to contribute to growth. E-commerce sales, which contribute around 14% to the company’s sales, have been on the rise amid the stay-at-home scenario.
Expected Savings From Reinvent SEE Strategy: Sealed Air’s Reinvent SEE Strategy, which is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements, has been instrumental in driving earnings growth. One of most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets. The company achieved $28 million benefits from Reinvent SEE in the first half of the current year and remains on track to realize benefits of around $65 million in 2021.
Investments to Grow Business: Sealed Air’s focus on automation, digital and sustainability is expected to drive above-market growth in its core business, enabling it to expand into new and adjacent markets. The company’s SEE automated solutions strategy is driving growth for the next phase of its Reinvent SEE business transformation. Sealed Air is meeting customers' most critical needs for safety, productivity and labor scarcity with its touchless automated solutions. It expects equipment sales to grow 12% in 2021 to over $250 million. The company’s pipeline for automated equipment continues to improve, and it has set a target of over $500 million by 2025. Sealed Air is investing more than $30 million in capacity expansion to meet the strong demand for equipment solutions. These investments, along with the company’s acquisitions of Automated Packaging Systems, AFP, Inc, and Fagerdala, will drive growth.
Zacks Rank & Other Stocks to Consider
Sealed Air currently 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 are Kadant Inc. KAI, Deere & Company DE and Mueller Industries, Inc. MLI. All of these stocks sport a Zacks Rank #1.
Kadant has an estimated earnings growth rate of 47.9% for the ongoing year. The company’s shares have gained 72% in a year’s time.
Deere & Company has a projected earnings growth rate of 115% for fiscal 2021. Over the past year, the company’s shares have appreciated 81%.
Mueller Industries has an expected earnings growth rate of 154% for 2021. The stock has climbed 43% in the past year.
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