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Sealed Air (SEE) Bets on Strong Demand Amid High Input Costs
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On Apr 8, we issued an updated research report on Sealed Air Corporation (SEE - Free Report) . Increase in requirement for food, medical supplies, consumer staples, and rise in e-commerce demand triggered by the COVID-19 pandemic have been working in favor of the company. Apart from this, benefits from its Reinvent SEE program, acquisitions and product innovation also remain growth drivers. However, the pandemic-induced weakness in food service and restaurants will impact Sealed Air’s top-line in the near term, while higher input cots will constrain margins.
COVID-19 Induced Demand to Aid Growth
Around 63% of Sealed Air’s revenues stems from packaging of protein, foods, fluids and goods for the medical and life sciences industries. The 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. The company has also been witnessing increased demand for temperature assurance packaging solution that ensures safe and secure distribution of COVID-19 vaccines.
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, Sealed Air is positioned well to sustain the top-line performance.
For 2021, the company expects net sales in the range of $5.1 billion to $5.2 billion. This indicates an increase of 4.5% to 6.5% as reported and 2.5% to 4.5% in constant dollars.
Reinvent SEE Strategy to Boost Earnings
In December 2018, Sealed Air embarked on its Reinvent SEE Strategy in an effort 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.
Sealed Air also aims at simplifying its operational structure and expanding SEE Operational Excellence by upgrading end-to-end processes throughout the company. 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. In 2020, the company realized benefits worth $118 million from the program and has targeted another $65 million in 2021. This will continue to drive bottom-line performance.
Innovation & Acquisitions: Key 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, namely of Automated Packaging Systems, AFP, Inc., and Fagerdala to grow its product offerings will also contribute to growth.
Headwinds to Counter
Parts of the food industry including food service and restaurants have been impacted significantly by the COVID-19 pandemic. Over the next few quarters, the company’s fluids portfolio, which comprises innovative vertical pouch packaging, for condiments, soups and sauces will be negatively impacted by the ongoing slowdown in the food service industry. Further, Sealed Air’s total debt-to-total capital ratio is currently at 0.96, which is concerning. Its margins continue to be impacted by higher raw material costs and freight costs.
Price Performance
The stock has gained 47.3% in the past year, compared with the industry’s rally of 43.8%.
Zacks Rank & Stocks to Consider
Sealed Air currently carries a Zacks Rank #3 (Hold).
Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 157%.
AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 179% in the past year.
Crown Holdings has an expected earnings growth rate of 16.2% for 2021. The stock has appreciated 64% in a year’s time.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
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.
Image: Bigstock
Sealed Air (SEE) Bets on Strong Demand Amid High Input Costs
On Apr 8, we issued an updated research report on Sealed Air Corporation (SEE - Free Report) . Increase in requirement for food, medical supplies, consumer staples, and rise in e-commerce demand triggered by the COVID-19 pandemic have been working in favor of the company. Apart from this, benefits from its Reinvent SEE program, acquisitions and product innovation also remain growth drivers. However, the pandemic-induced weakness in food service and restaurants will impact Sealed Air’s top-line in the near term, while higher input cots will constrain margins.
COVID-19 Induced Demand to Aid Growth
Around 63% of Sealed Air’s revenues stems from packaging of protein, foods, fluids and goods for the medical and life sciences industries. The 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. The company has also been witnessing increased demand for temperature assurance packaging solution that ensures safe and secure distribution of COVID-19 vaccines.
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, Sealed Air is positioned well to sustain the top-line performance.
For 2021, the company expects net sales in the range of $5.1 billion to $5.2 billion. This indicates an increase of 4.5% to 6.5% as reported and 2.5% to 4.5% in constant dollars.
Reinvent SEE Strategy to Boost Earnings
In December 2018, Sealed Air embarked on its Reinvent SEE Strategy in an effort 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.
Sealed Air also aims at simplifying its operational structure and expanding SEE Operational Excellence by upgrading end-to-end processes throughout the company. 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. In 2020, the company realized benefits worth $118 million from the program and has targeted another $65 million in 2021. This will continue to drive bottom-line performance.
Innovation & Acquisitions: Key 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, namely of Automated Packaging Systems, AFP, Inc., and Fagerdala to grow its product offerings will also contribute to growth.
Headwinds to Counter
Parts of the food industry including food service and restaurants have been impacted significantly by the COVID-19 pandemic. Over the next few quarters, the company’s fluids portfolio, which comprises innovative vertical pouch packaging, for condiments, soups and sauces will be negatively impacted by the ongoing slowdown in the food service industry. Further, Sealed Air’s total debt-to-total capital ratio is currently at 0.96, which is concerning. Its margins continue to be impacted by higher raw material costs and freight costs.
Price Performance
The stock has gained 47.3% in the past year, compared with the industry’s rally of 43.8%.
Zacks Rank & Stocks to Consider
Sealed Air currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Deere & Company (DE - Free Report) , AGCO Corporation (AGCO) and Crown Holdings, Inc. (CCK). All of these stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 157%.
AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 179% in the past year.
Crown Holdings has an expected earnings growth rate of 16.2% for 2021. The stock has appreciated 64% in a year’s time.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
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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