Sealed Air (SEE) Q3 Earnings & Revenue Top Estimates, Up Y/Y
Sealed Air Corporation SEE delivered third-quarter 2018 adjusted earnings per share of 61 cents that came in ahead of the Zacks Consensus Estimate of 60 cents and also surged 33% year over year.
Including special items, the company reported net earnings per share of 48 cents, up from net earnings per share of 33 cents in the year-ago quarter.
Total revenues increased 5% year over year on a reported basis to 1,186 million in the reported quarter. The figure beat the Zacks Consensus Estimate of $1,184 million. Currency had a negative impact on total net sales of $39 million or 3%. Sales increased across all regions in the quarter under review.
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 rose 7% year over year to $821 million. Gross profit inched up 1.3% to $366 million. Gross margin contracted 110 basis points (bps) to 30.8% in the third quarter.
SG&A expenses fell roughly 8% to $192 million from the prior-year quarter’s figure. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $219 million in the quarter compared with $217 million in the prior-year quarter. Adjusted EBITDA was partially affected by currency fluctuations as well as higher than expected raw material and freight costs. Adjusted EBITDA margin was 18.5% compared with 19.2% in the prior-year quarter.
Food Care: Net sales rose 2% year over year to $727 million. Adjusted EBITDA increased 4% year over year to $145 million. Currency had an unfavorable impact of $8 million on Adjusted EBITDA.
Product Care: The segment reported net sales of $459 million, up 11% year over year. Currency had a negative impact on Product Care’s net sales of 1% or $6 million. Adjusted EBITDA decreased 2% to $76 million.
Cash and cash equivalents were $191 million as of Sep 30, 2018, down from $594 million as of Dec 31, 2017. Cash flow from operating activities was around $150 million in the nine-month period ended Sep 30, 2018 compared with $333 million in the prior-year comparable period.
As of Sep 30, 2018, Sealed Air’s net debt came in at $3.4 billion, up from $2.7 billion as of Dec 31, 2017 owing to use of cash related to working capital, acquisition activity and share repurchases.
From Jul 1, 2018 to Oct 31, 2018, the company repurchased around 3.0 million shares for $121 million. This brings the aggregate repurchase for the year to roughly 13.5 million shares or $603 million.
Sealed Air projects net sales of roughly $4.7 billion for 2018, at a constant dollar growth rate of approximately 6%. Adjusted EBITDA from continuing operations is expected in the range of $870-$880 million, a constant dollar growth rate of approximately 6% compared with the prior year. Currency headwinds are anticipated to have a negative impact of $40 million on net sales and $10 million on adjusted EBITDA. Adjusted earnings per share are projected at $2.40-$2.45.
The company expects free cash flow for 2018 at around $350 million, based on assumption of capital expenditures of approximately $165 million.
The company now anticipates annualized savings of $40 million in 2018 from its existing restructuring program, $10 million higher than its previous expectation. An additional $25 million is expected for 2019. The company is analyzing additional opportunities to redesign its operating model and improve performance.
In the Product Care segment, the company experienced higher absorption costs in the third quarter due to lower global volume in the utility business, which contributes around 30% of the division's sales. This along with currency headwinds, and raw material and freight cost inflation will impact results in the remaining part of 2018.
Shares of Sealed Air have slumped 26% in the past year compared with the industry’s decline of 14%.
Zacks Rank & Stocks to Consider
Sealed Air currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering in the same sector are DMC Global Inc. BOOM, Tetra Tech, Inc. TTEK and Mobile Mini, Inc. MINI. While DMC Global and Tetra Tech sport a Zacks Rank #1 (Strong Buy), Mobile Mini carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DMC Global has a long-term earnings growth rate of 20%. The stock has appreciated 79% in a year’s time.
Tetra Tech has a long-term earnings growth rate of 14%. The company’s shares have been up 35% in a year.
Mobile Mini has a long-term earnings growth rate of 14%. Its shares have rallied 22% in the past three months.
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