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On Dec 3, we maintained our Outperform recommendation on Sealed Air Corporation (SEE - Analyst Report). This was based on expected benefits from its restructuring programs, recent price increases and sale of the rigid medical packaging business.

Why Upgraded?

Sealed Air’s third-quarter adjusted net earnings improved 39% year over year to 39 cents, helped by higher volumes and a positive price/mix. Total revenue climbed 2% year over year to $1.93 billion, helped by a 1.4% improvement in volume and 1.5% improvement in price/mix.

Sealed Air raised its guidance for fiscal 2013 adjusted earnings per share to the range $1.25 to $1.30 from $1.10 to $1.20. Net sales guidance was changed to $7.7 billion as against prior range of $7.7 to $7.9 billion.

Sealed Air’s Integration & Optimization Program will generate cost savings and benefits of approximately $195 million to $200 million by the end of 2014. The company is expected to realize $90 million of benefits in 2013, of which approximately $71 million has been realized in the first three quarters of 2013. Sealed Air has also announced an additional restructuring plan with projected annualized savings of $80 million by 2015.

Sealed Air announced a 4-9% price increase, effective Nov 1, for most products in its Food Care and Product Care divisions in North America. The price hike is in response to rising polyethylene costs and it may boost the 2014 results if successful.

Sealed Air has agreed to sell its rigid medical packaging business to Milwaukee-based private equity firm Mason Wells for $125 million as it is no longer considered to be a strategic fit for the company. The proceeds are likely to be utilized to pay back debt and thus reduce interest expense, and thereby contributing to margins.

Other Stocks to Consider

Some other stocks worth considering in the sector include Clearwater Paper Corporation (CLW - Snapshot Report), Packaging Corporation of America (PKG - Snapshot Report), UFP Technologies, Inc. (UFPT - Snapshot Report). While Clearwater holds a Zacks Rank #1 (Strong Buy), Packaging Corporation and UFP Technologies carry a Zacks Rank #2 (Buy).
 

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