On Oct 3, we issued an updated research report on Sealed Air Corporation SEE. The company is poised to benefit from acquisitions, innovative products, Reinvent SEE Strategy, restructuring programs, and growth in fresh food and e-commerce markets.
Upbeat Prospects for 2019
Sealed Air projects net sales at around $4.85 billion for 2019, which indicates year-over-year growth of 2% on reported basis and 5% in constant dollars. Acquisitions are expected to contribute an improvement of 4% in revenues. Adjusted EBITDA in 2019 is estimated to lie between $950 million and $960 million compared with $890 million reported in 2018. The company projects adjusted earnings per share at $2.70-$2.80.
The Zacks Consensus Estimate for Sealed Air’s earnings per share for 2019 is $2.78 and the same for revenues is $4.83 billion. The estimate for revenues and earnings per share indicates year-over-year growth of 2.04% and 11.2%, respectively.
Savings from Restructuring to Aid Margins
In December 2018, Sealed Air announced a reformation plan — Reinvent SEE Strategy — along with a fresh restructuring program, in a move to drive growth and earnings. The new strategy is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements. One of the most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets. Also, the new strategy will fuel Sealed Air’s growth by supporting packaging innovations for fresh food and e-commerce.
Sealed Air will combine the new program with its ongoing restructuring program. Both programs will likely lead to total annualized savings of $240-$260 million from 2019 through 2021.
Acquisitions to Spur Growth
Sealed Air acquired Automated Packaging Systems, Inc. during the June-end quarter. This acquisition will strengthen its portfolio and drive growth in e-commerce, fulfillment and food packaging markets. The buyout of AFP, Inc. expanded Sealed Air’s protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications.
The company has also acquired Fagerdala, to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication, and commercial organization to improve 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.
Poised Well for the Long Run
Sealed Air’s top line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations, strong fresh food markets and e-commerce activities. The company is witnessing increased demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity. Furthermore, ongoing momentum in high-growth geographies such as Brazil, Russia, China and Southeast Asia will continue as demand increases for packaged proteins and convenience meals.
In addition, expected benefits from reducing costs, driving operational excellence and commercializing new innovations, along with favorable global business trends position the company well for improved margins.
So far this year, shares of Sealed Air have gained 15.1% against the industry's decline of 24.6%.
Zacks Rank & Other Stocks to Consider
Sealed Air currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Industrial Products sector are AGCO Corp. AGCO, John Bean Technologies Corporation JBT and UFP Technologies, Inc. UFPT. While AGCO Corp sports a Zacks Rank #1 (Strong Buy), John Bean Technologies and UFP Technologies carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO Corp. has a projected earnings growth rate of 11.2% for the current year. The stock has gained 29.9% so far this year.
John Bean Technologies has an estimated earnings growth rate of 13.08% for 2019. The company’s shares have appreciated 32.7% year to date.
UFP Technologies has an expected earnings growth rate of 8.10% for the ongoing year. The stock has jumped 31.3% in the year-to-date period.
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