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Sealed Air (SEE) Rides on Strong Demand, Restructuring Actions

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Zacks Equity Research
·4 min read
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On Dec 15, we issued an updated research report on Sealed Air Corporation SEE. The company has been gaining from higher demand for food, medical supplies, consumer staples, and rise in e-commerce demand triggered by the COVID-19 pandemic. Apart from this, benefits from its Reinvent SEE program is expected to boost earnings. Continuous focus on acquisitions and innovation also remain growth drivers.

COVID-19 Crisis Fueling Growth

Sealed Air’s food care business continues to benefit from the shift in demand for case ready, shrink bags and pre-packaged meals and snacks designed for home consumption amid the pandemic-induced restrictions. In the medical and life sciences portfolio, demand for protected packaging solutions for medical supplies, pharmaceuticals, and personal protective equipment, such as monitoring systems, ventilators, mask and COVID-19 test kits remains high. Further, e-commerce sales, which contribute around 14% to the company’s sales, have been on the rise amid the stay-at-home scenario.

Thus, with more than 75% of the company’s revenues originating from end-markets that are deemed essential and supporting the stay-at-home environment amid the pandemic, the company is positioned well to sustain the top line.

Restructuring Moves to Yield Savings

In December 2018, Sealed Air embarked on its Reinvent SEE Strategy in a move to drive growth. It is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements. One of most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets.

The company also aims at simplifying operational structure. The new strategy will fuel Sealed Air’s growth by supporting packaging innovations for fresh food and e-commerce, and increase operating leverage target above 40% per year. Over the 2019-2021 timeframe, the company has targeted approximately $340 million of Reinvent SEE benefits. This will continue to boost the bottom-line performance.

Innovation & Acquisitions Acting as Catalysts

Sealed Air’s top-line will be supported by its focus on bringing innovative products into the market. The company is witnessing increasing demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity. Acquisitions to grow its product offerings will also contribute to growth. Sealed Air’s buyout of Automated Packaging Systems expands breadth of the company’s automated solutions and sustainable packaging offerings. The acquisition of AFP Inc. expanded its protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications.

The company had also acquired Fagerdala, to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication, and commercial organization to grow sales in the consumer electronics, medical equipment and devices, automotive, temperature assurance, and e-commerce fulfillment sectors. AFP and Fagerdala align well with the ship-in-own-container (SIOC) trend in e-commerce. This trend is transforming e-commerce packaging as more distributors want manufacturers to have their primary packaging parcel ready.

Price Performance

The stock has gained 42% in the past six months, compared with the industry’s growth of 8.4%.

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 include iRobot Corporation IRBT, Deere & Company DE and Silgan Holdings Inc. SLGN. While iRobot and Deere flaunt a Zacks Rank #1, Silgan carries a Zacks Rank of 2, at present.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 1.7% in the six months.

Deere has an expected earnings growth rate of 46% for fiscal 2021. The stock has appreciated 59.6% in six months’ time.

Silgan has a projected earnings growth rate of 37.9% for the current year. Over the past six months, the company’s shares have rallied 12%.

Zacks Names “Single Best Pick to Double”

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You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
 
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