Sealed Air (SEE) Q1 Earnings Beat Estimates, Hikes '21 View
Sealed Air Corporation SEE reported first-quarter 2021 adjusted earnings per share of 78 cents, surpassing the Zacks Consensus Estimate of 71 cents. The bottom line also improved 7% year over year on higher volumes and benefits from the company’s Reinvent SEE initiatives, somewhat offset by raw material inflation and higher costs related to the winter storm supply chain disruptions.
Including special items, the company delivered net earnings per share of 68 cents compared with the prior-year quarter figure of 74 cents.
Total revenues were up 8% year over year to $1.27 billion in the reported quarter highlighting strength in e-Commerce, food retail and equipment, and pickup in industrial activity. Further, the top line beat the Zacks Consensus Estimate of $1.22 billion.
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 climbed 10.5% year over year to $866 million. Gross profit increased 3% year over year to $401 million. Gross margin contracted 160 basis points to 31.7% from the prior-year quarter’s 33.1%.
SG&A expenses declined 3% to $1895 million year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $268 million in the quarter, up 6% from the prior-year quarter. Adjusted EBITDA margin was 21.2% compared with the prior-year quarter’s 21.6%. Benefits from higher volume and productivity improvements helped negate the impact of global supply chain disruptions related to Winter Storm Uri.
Segment Performance
Food: Net sales inched up 1.7% year over year to $702 million. Strength in food retail and automated equipment was partially negated by continued weakness in food service due to the impact of COVID-19. Adjusted EBITDA was up 0.4% year over year to $110 million. Gains from Reinvent SEE productivity improvements were offset by raw material inflation and higher costs related to the winter storm supply chain disruptions.
Protective: The segment reported net sales of $565 million in the quarter under review, up 17% from the prior-year quarter led by continued strength in e-Commerce, fulfillment and automated equipment as well as recovery in industrial segments. Adjusted EBITDA advanced 18% year over year to $110 million driven by volume growth and Reinvent SEE productivity improvements, partially negated by raw material inflation and higher costs related to the winter storm supply chain disruptions.
Financial Updates
Cash flow from operating activities was around $80 million in the first quarter of 2021 compared with $41 million in the prior-year quarter. During the reported quarter, Sealed Air paid cash dividends of around $26 million and made share repurchases worth $177 million.
As of Mar 31, 2021, Sealed Air’s net debt was $3.4 billion, up from $3.2 billion as of Dec 31, 2020. As of the quarter-end, the company had approximately $1.5 billion of liquidity available, which comprised $370 million in cash and $1,133 million of undrawn, committed credit facilities.
2021 Guidance Updated
For 2021, Sealed Air expects net sales in the range of range of $5.25 billion to $5.35 billion, higher than the prior expectation of $5.1 billion to $5.2 billion. This indicates an increase of 7% to 9% growth as reported and 6% to 8% in constant dollars.
Adjusted EBITDA is projected between $1.12 billion and $1.15 billion, updated from its previous range of $1.10 billion to $1.13 billion in 2021. Adjusted earnings per share is now anticipated in the band of $3.40 to $3.55. The mid-point of the range suggests year-over-year growth of 9%.The company had earlier provided a guidance range of $3.25-$3.40.
Free cash flow is estimated between $520 million and $570 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 84.3%, compared with the industry’s rally of 52.0%.
Zacks Rank and Stocks to Consider
Sealed Air carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Caterpillar Inc. CAT, Dover Corporation DOV and Pentair plc PNR. While Caterpillar sports a Zacks Rank #1 (Strong Buy), Dover and Pentair carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an estimated earnings growth rate of 25.7% for the ongoing year. The company’s shares have rallied 112% in the past year.
Dover has a projected earnings growth rate of 21.8% for 2021. Over the past year, the company’s shares have gained 65%.
Pentair has an expected earnings growth rate of 11.6% for 2021. The stock has surged 87% in a year’s time.
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