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Sealed Air (SEE) Tops Q3 Earnings, Guides a Strong Q4
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Sealed Air Corporation’s (SEE - Free Report) third-quarter 2016 adjusted earnings per share of 71 cents increased 1% year over year. The figure beat the Zacks Consensus Estimate by a penny. Including special items, earnings came in at 83 cents per share, soaring 98% from the year-ago quarter.
Total revenue dipped 1.7% on a reported basis to $1,717 million in the quarter. Revenues missed the Zacks Consensus Estimate of $1,747 million. The Food Care divestitures had a negative impact on total sales of 0.8% while currency had a negative impact of 1.8%.
Net sales on an organic basis inched up 0.9%. Organic sales in Asia Pacific and EMEA declined 3.1% and 0.5%, respectively. On a constant dollar basis, Latin America improved 8.7% while North America increased 1.6%. Volume growth in North America and Europe were offset by declines in EMEA and Asia Pacific.
Cost and Margins
Cost of sales slipped 3% year over year to $1,077 million. Gross profit went up 0.5% to $640 million. Gross margin expanded 80 basis points (bps) to 37.3% in the quarter.
SG&A expenses fell 2.6% to $390 million from the prior-year period. Adjusted operating profit increased 2% to $250 million. Adjusted operating margin expanded 100 bps to 14.5%.
Adjusted earnings before interest, taxes and depreciation and amortization (EBITDA) were $303.9 million, compared with $300 million in the year-ago quarter. Favorable price/cost spread and restructuring savings, partially neutralized by $4 million of unfavorable currency translation, divestitures of $3 million, salary and wage inflation along with higher non-material manufacturing expenses led to the improvement.
Segment Performance
Food Care: Net sales dropped 3% year over year to $815 million. Adjusted EBITDA however improved 2% to $173 million.
Diversey Care: In this segment, net sales were $497 million, down 1% on a reported basis. Adjusted EBITDA edged down 3% to $65 million from $66 million in the year-ago quarter.
Product Care: The segment reported net sales of $389 million, flat year over year on a reported basis. Adjusted EBITDA increased 8% to $88.2 million.
Financial & Other Updates
Cash and cash equivalents were $332.8 million as of Sep 30, 2016, down from $358 million as of Dec 31, 2015. Cash flow from operating activities in the first nine months of 2016 was $471 million, a drastic decline from $701 million in the prior-year period. In Mar 2015,
Sealed Air had received a tax refund of $235 million related to the payment of funds in connection with the settlement agreement. Excluding the refund, cash flow from operating activities in the first nine months of 2015 was $466 million, which is net of $72 million of restructuring and $20 million of SARs payments.
During the quarter, Sealed Air repurchased approximately 3.5 million shares of its common stock for approximately $165 million and paid dividends worth $31 million. Recently, the company announced its intention to pursue the tax-free spin-off of its Diversey Care division and the food hygiene and cleaning business within its Food Care division. It would create two independent companies,
New Sealed Air consisting of the remaining Sealed Air business and New Diversey. Each will have an enhanced strategic focus, simplified operating structure, distinct investment identity and strong financial profile. The transaction is anticipated to be completed in second-half 2017, pursuant to final approval by Sealed Air’s Board of Directors, as well as other customary conditions.
Guidance
Despite softer sales growth in the quarter and for the full year 2016, Sealed Air expects improved performance in both its top and bottom line in the fourth quarter as well as in 2017. This will likely be driven by its efforts to continue to build a robust pipeline for its innovative solutions and capitalize on end market growth opportunities.
Sealed Air projects adjusted earnings per share to be around $2.60 in 2016 backed by revenues of $6.8 billion. Adjusted EBITDA is expected at approximately $1.17 billion. Currency will have a negative impact of approximately $225 million on net sales and $35 million on Adjusted EBITDA. The outlook factors in an adjusted tax rate of 24%.
Free cash flow will be around $550 million, including capital expenditures of approximately $275 million and cash restructuring payments of approximately $90 million.
Sealed Air currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the industrial products sector include ACCO Brands Corporation (ACCO - Free Report) , Brady Corp. (BRC - Free Report) and Harsco Corporation . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ACCO Brands delivered an average positive earnings surprise of 23.93% in the last four quarters. Harsco delivered an average positive earnings surprise of 89.75% in the past four quarters while Brady has an average positive earnings surprise of 31.49% in the past four quarters.
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Sealed Air (SEE) Tops Q3 Earnings, Guides a Strong Q4
Sealed Air Corporation’s (SEE - Free Report) third-quarter 2016 adjusted earnings per share of 71 cents increased 1% year over year. The figure beat the Zacks Consensus Estimate by a penny. Including special items, earnings came in at 83 cents per share, soaring 98% from the year-ago quarter.
Total revenue dipped 1.7% on a reported basis to $1,717 million in the quarter. Revenues missed the Zacks Consensus Estimate of $1,747 million. The Food Care divestitures had a negative impact on total sales of 0.8% while currency had a negative impact of 1.8%.
Net sales on an organic basis inched up 0.9%. Organic sales in Asia Pacific and EMEA declined 3.1% and 0.5%, respectively. On a constant dollar basis, Latin America improved 8.7% while North America increased 1.6%. Volume growth in North America and Europe were offset by declines in EMEA and Asia Pacific.
Cost and Margins
Cost of sales slipped 3% year over year to $1,077 million. Gross profit went up 0.5% to $640 million. Gross margin expanded 80 basis points (bps) to 37.3% in the quarter.
SG&A expenses fell 2.6% to $390 million from the prior-year period. Adjusted operating profit increased 2% to $250 million. Adjusted operating margin expanded 100 bps to 14.5%.
Adjusted earnings before interest, taxes and depreciation and amortization (EBITDA) were $303.9 million, compared with $300 million in the year-ago quarter. Favorable price/cost spread and restructuring savings, partially neutralized by $4 million of unfavorable currency translation, divestitures of $3 million, salary and wage inflation along with higher non-material manufacturing expenses led to the improvement.
Segment Performance
Food Care: Net sales dropped 3% year over year to $815 million. Adjusted EBITDA however improved 2% to $173 million.
Diversey Care: In this segment, net sales were $497 million, down 1% on a reported basis. Adjusted EBITDA edged down 3% to $65 million from $66 million in the year-ago quarter.
Product Care: The segment reported net sales of $389 million, flat year over year on a reported basis. Adjusted EBITDA increased 8% to $88.2 million.
Financial & Other Updates
Cash and cash equivalents were $332.8 million as of Sep 30, 2016, down from $358 million as of Dec 31, 2015. Cash flow from operating activities in the first nine months of 2016 was $471 million, a drastic decline from $701 million in the prior-year period. In Mar 2015,
Sealed Air had received a tax refund of $235 million related to the payment of funds in connection with the settlement agreement. Excluding the refund, cash flow from operating activities in the first nine months of 2015 was $466 million, which is net of $72 million of restructuring and $20 million of SARs payments.
During the quarter, Sealed Air repurchased approximately 3.5 million shares of its common stock for approximately $165 million and paid dividends worth $31 million. Recently, the company announced its intention to pursue the tax-free spin-off of its Diversey Care division and the food hygiene and cleaning business within its Food Care division. It would create two independent companies,
New Sealed Air consisting of the remaining Sealed Air business and New Diversey. Each will have an enhanced strategic focus, simplified operating structure, distinct investment identity and strong financial profile. The transaction is anticipated to be completed in second-half 2017, pursuant to final approval by Sealed Air’s Board of Directors, as well as other customary conditions.
Guidance
Despite softer sales growth in the quarter and for the full year 2016, Sealed Air expects improved performance in both its top and bottom line in the fourth quarter as well as in 2017. This will likely be driven by its efforts to continue to build a robust pipeline for its innovative solutions and capitalize on end market growth opportunities.
Sealed Air projects adjusted earnings per share to be around $2.60 in 2016 backed by revenues of $6.8 billion. Adjusted EBITDA is expected at approximately $1.17 billion. Currency will have a negative impact of approximately $225 million on net sales and $35 million on Adjusted EBITDA. The outlook factors in an adjusted tax rate of 24%.
Free cash flow will be around $550 million, including capital expenditures of approximately $275 million and cash restructuring payments of approximately $90 million.
SEALED AIR CORP Price, Consensus and EPS Surprise
SEALED AIR CORP Price, Consensus and EPS Surprise | SEALED AIR CORP Quote
Zacks Rank
Sealed Air currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the industrial products sector include ACCO Brands Corporation (ACCO - Free Report) , Brady Corp. (BRC - Free Report) and Harsco Corporation . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ACCO Brands delivered an average positive earnings surprise of 23.93% in the last four quarters. Harsco delivered an average positive earnings surprise of 89.75% in the past four quarters while Brady has an average positive earnings surprise of 31.49% in the past four quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>