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Why Hold Strategy is Apt for Sealed Air (SEE) Stock Right Now

Zacks Equity Research

Sealed Air Corporation SEE is likely to benefit from its Reinvent SEE Strategy, restructuring actions, growing demand in fresh food and e-commerce markets, and acquisitions.

The company recently reported first-quarter 2019 results. Adjusted earnings in the quarter were 59 cents per share, improving 16% from the prior year. The bottom-line figure also outpaced the Zacks Consensus Estimate.
 
Shares of this Zacks Rank #3 (Hold) company have gained 20.1% year to date, outperforming the industry’s growth of 15.6%. With the stock price appreciation and a Value Score of B, it seems to be a stock that investors should retain in their portfolios now.  Moreover, it looks promising and is poised to carry the momentum ahead, driven by the following factors.


 
Reinvent SEE Strategy to be a Game Changer: Last December, 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. The strategy will help the company deal with critical packaging challenges, in turn, improving customer services. One of most vital aspects of this strategy involves investment in technology and resources, focusing on new and existing high-growth markets. This step will double Sealed Air’s innovation rate over the next five years. The company also aims at simplifying its operational structure and expanding SEE Operational Excellence by upgrading end-to-end processes throughout the company.

Focus on Strong Demand in Fresh Food and E-commerce: Aided by its strategy, Sealed Air will be able to drive market share in existing and adjacent markets by leveraging the company’s extensive distribution network. It will continue to invest in digital systems and processes, in order to enhance cycle time and awareness. Consequently, the new strategy will fuel Sealed Air’s growth by supporting packaging innovations for fresh food and e-commerce, and increasing operating leverage target above 40% per year, beginning 2019.
 
Restructuring Efforts to Bear Fruit: Sealed Air’s Reinvent SEE strategy includes a new three-year restructuring program that is anticipated to drive total annualized savings in the range of $215-$235 million by the end of 2021. Of this, approximately $45 million is projected to be realized in 2019. The company will combine the new program with its ongoing restructuring program. The existing program will be completed this year, while the new program will be concluded by the end of 2021. Both programs are likely to lead to total annualized savings of $240-$260 million from 2019 through 2021. In 2019, total annualized savings from both programs are expected to be approximately $70 million.
 
Acquisitions to be Catalysts: In August 2018, the company acquired AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions. The buyout expands Sealed Air's protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. The acquisition complements the Fagerdala buyout which was completed in 2017. The company had acquired Fagerdala to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication. It will help Sealed Air 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.
 
Upbeat Outlook for 2019: For 2019, Sealed Air projects net sales at $4.8 billion, reflecting year-over-year growth at approximately 2% on a reported basis and 5% in constant dollars. The company forecasts adjusted EPS to be in the $2.65-$2.75 band, an increase of approximately 6-10% compared with the prior year. Sealed Air's top line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations, strong fresh food markets and the e-commerce sector. The company is witnessing increased demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity.

Positive Growth Projections: The Zacks Consensus Estimate for earnings is currently pegged at $2.73 for 2019, reflecting year-over-year growth of 9.20%. For 2020, the Zacks Consensus Estimate for earnings is currently pegged at $2.99, calling for year-over-year growth of 9.43%.
 
Positive Earnings Surprise History: The company has surpassed estimates in the trailing four quarters, recording an average positive earnings surprise of 6.87%.

Sealed Air Corporation Price and Consensus

Sealed Air Corporation Price and Consensus

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

Stocks to Consider

A few better-ranked stocks in the Industrial Products sector are DMC Global Inc. BOOM , Lawson Products, Inc. LAWS and Harsco Corporation HSC, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has an estimated earnings growth rate of 83.5% for the ongoing year. The company’s shares have soared 54.6%, in the past year.

Lawson Products has an expected earnings growth rate of 24.5% for the current year. The stock has appreciated 59.4% in a year’s time.

Harsco has a projected earnings growth rate of 9.1% for 2019. The company’s shares have gained 5.4%, over the past year.

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Sealed Air Corporation (SEE) : Free Stock Analysis Report
 
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Harsco Corporation (HSC) : Free Stock Analysis Report
 
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