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Sealed Air (SEE) Q3 Earnings & Revenues Surpass Estimates

Sealed Air Corporation SEE has reported third-quarter 2023 adjusted earnings per share of 77 cents, which surpassed the Zacks Consensus Estimate of earnings of 63 cents per share. The bottom line fell 21% year over year, dragged down by lower volumes, somewhat offset by contribution from the Liquibox acquisition.

Including special items, the company delivered net earnings per share of 40 cents compared with the prior-year quarter’s earnings of 91 cents per share.

Total revenues were down 1.3% year over year to $1,382 million in the reported quarter. The top line beat the Zacks Consensus Estimate of $1,359 million.

Currency had an unfavorable impact of 1% and price had an unfavorable impact of 0.3%. Meanwhile, volumes were down 6% year over year. Our model predicted currency to have an unfavorable impact of 0.1% and pricing to have favored sales by 1.2%. We anticipated volumes to decrease 9.9% year over year. The variance is mainly due to the ongoing destocking in the industrial and fulfillment sectors.

Sales in the APAC (in constant dollars) declined 3% year over year while sales in the Americas witnessed a decline of 2.4%. Sales in EMEA were up 3.4% year over year.

Sealed Air Corporation Price, Consensus and EPS Surprise

 

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

Costs and Margins

The cost of sales rose 0.2% year over year to $968.5 million. The gross profit was $413 million, which marked a 5% decline from the year-ago quarter’s $434 million. The gross margin contracted to 29.9% from the prior-year quarter’s 31%.

SG&A expenses decreased 7.2% from the last-year quarter to $182 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were around $285 million in the quarter, which decreased 2.7% from the prior-year period. The adjusted EBITDA margin was 20.6% compared with the prior-year quarter’s 20.9%, courtesy of lower volumes, partially offset by earnings generated from Liquibox.

Segmental Performance

Food: Net sales increased 8% year over year to $893 million. However, the figure missed our estimate of $898 million. Volumes were down 1% while pricing actions had a favorable impact of 1%. The segment continues to witness lower volumes due to food retail market declines, partially offset by growth in food automation solutions

We expected volume to be down 3% and pricing to be up 1.6%. The Liquibox acquisition contributed 10% to the sales growth, in line with our projection. Currency fluctuations had an unfavorable impact of 2%. Our model predicted currency to negatively impact the segment’s sales by 0.2%.

Adjusted EBITDA was $194 million, up 5% from the year-ago quarter, owing to gains from the Liquibox acquisition. The reported figure surpassed our estimate of $181 million.

Protective: The segment reported net sales of $488 million in the quarter under review, down 14% from the prior-year quarter. The segment, however, fared better than our expectation of $464 million in sales. Currency had a favorable impact of 1%. Pricing had a negative impact of 2%. Volumes fell 13% due to continued market pressures and destocking in the industrial and fulfillment sectors.

Our model predicted currency to negatively impact sales by 0.1%, and price to positively impact sales by 0.7%. We had expected volume to fall 19.3% in the quarter.

The segment’s adjusted EBITDA decreased 13% year over year to $95 million, driven by lower volumes. We expected adjusted EBITDA to be $90.6 million.

Financial Updates

SEE generated cash flow of $192.5 million from operating activities in the first nine-month period of 2023 against $320.8 million in the prior-year comparable period. The company paid out cash dividends of $89 million in the first nine months of 2023.

As of Sep 30, 2023, Sealed Air’s net debt was $4.9 billion, up from $3.7 billion as of Dec 31, 2022. As of the end of the third quarter of 2023, the company had $1.19 billion of liquidity available, which comprised $281 million in cash and $911 million of undrawn, committed credit facilities.

2023 Guidance

For 2023, Sealed Air expects net sales to be between $5.40 billion and $5.60 billon. Adjusted EBITDA is projected to be between $1.075 billion and $1.125 billion.

Adjusted earnings per share (EPS) are forecast in the range of $2.75 to $2.95.

Price Performance

In a year, Sealed Air’s shares have gained 26.2% against the industry’s 1.6% decline.

 

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Zacks Rank and Stocks to Consider

Sealed Air currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Industrial Products sector are Brady BRC, Applied Industrial Technologies AIT and Emerson Electric Co. EMR. BRC currently sports a Zacks Rank #1 (Strong Buy), and AIT and EMR have a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Brady’s 2023 EPS is pegged at $3.62. The consensus estimate for 2023 earnings has moved 13% north in the past 60 days and suggests year-over-year growth of 9.9%. The company has a trailing four-quarter average earnings surprise of 7.2%. Shares of BRC have rallied 14% in the last year.

Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pegged at $9.13 per share, which indicates year-over-year growth of 2%. Estimates have moved up 2% in the past 60 days. The company’s shares have gained 24% in the last year.

Emerson has an average trailing four-quarter earnings surprise of 7.4%. The Zacks Consensus Estimate for EMR’s 2023 earnings is pegged at $4.45 per share. The consensus estimate for 2023 earnings has moved 1% north in the past 60 days. EMR’s shares have gained 5% in the last year.

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Emerson Electric Co. (EMR) : Free Stock Analysis Report

Sealed Air Corporation (SEE) : Free Stock Analysis Report

Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report

Brady Corporation (BRC) : Free Stock Analysis Report

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