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5 Reasons to Dump Sealed Air (SEE) Stock from Your Portfolio
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Sealed Air Corporation (SEE - Free Report) has been disappointing investors of late. Shares of this specialty packaging service provider to a diverse set of end markets has inched up a meager 0.1% year to date.
Should investors dump this stock from their portfolio for the time being? Let’s find out.
Negative Estimate Revisions
The estimates for the company for second-quarter 2017, fiscal 2017 and fiscal 2018, have moved been revised downward in the past 60 days, reflecting the negative outlook of analysts. For the second quarter, the estimate has gone down 44% to 37 cents per share in the past 60 days.
For fiscal 2017, the estimate has dropped 32% to $1.77 in the past 60 days. For fiscal 2018, the estimate has declined 15% to $2.46 per share.
Negative Surprise History
In the trailing four quarters, the company posted an average negative earnings surprise of 0.55%.
Underperforming the Industry
Sealed Air’s stock has increased 1.3% in the past one year, grossly underperforming the Zacks categorized Containers – Paper/ Plastics sub industry’s gain of 23.4%.
Near-Term Headwinds Remain
For 2017, Sealed Air expects sales of $4.3 billion. The guidance reflects an expected 3% constant dollar sales growth in Food Care and 3–4% constant dollar sales growth in Product Care. Currency will negatively impact 2017 net sales by $35 million. Adjusted EBITDA is estimated to be approximately $825 million and adjusted earnings per share is likely to be around $1.70 for 2017. This includes the impact of the pending sale of Diversey.
In 2017, volume growth will be partially offset by higher raw material costs, a higher mix of e-commerce and fulfillment sales, along with the impact of functional support and related expenses previously allocated to Diversey that did not qualify for discontinued operations. Further, costs associated with the Diversey Care operations and various restructuring actions underway will strain margins.
Sealed Air’s results in APAC will be impacted as the Australia/New Zealand region rebuilds cattle herds, which is normally a two to four-year process and dairy markets remain muted. The company generates around 33% of total company sales from the European region. The company anticipates that the recent geopolitical events in Europe and the Middle East to have an effect on business.
Sealed Air experienced positive volume trends in Latin America led by 2% volume growth in food care segment. This was the first time since first-quarter 2014 that volume contributed to sales growth in this region. However, the selective ban on the Brazilian beef export will stall the recovery in this local market and negatively impact volumes in the second and third-quarters 2017.
In the product-care segment, growth in the top line is not translating to bottom-line growth as the company could not match suppliers’ price increases in resin and other raw products with price increases. Sealed Air is witnessing quick growth in online products, but many of those products are selling at lower margins.
Unfavorable Zacks Rank, Style Score
Sealed Air currently carries a Zacks Rank #5 (Sell) and a VGM Score of “D”. Here 'V' stands for Value, 'G' for Growth and 'M' for Momentum. The company’s score is a weighted combination of these three scores (Value - F, Growth - D, Momentum - A). A score of ‘A’ or ‘B’ is generally considered favorable and allow investors to rule out the negative aspects of stocks and select the valuable picks.
AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters.
Altra Industrial Motion generated an average positive earnings surprise of 15.93% in the past four quarters.
AptarGroup has an average positive earnings surprise of 1.78% in the last four quarters.
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5 Reasons to Dump Sealed Air (SEE) Stock from Your Portfolio
Sealed Air Corporation (SEE - Free Report) has been disappointing investors of late. Shares of this specialty packaging service provider to a diverse set of end markets has inched up a meager 0.1% year to date.
Should investors dump this stock from their portfolio for the time being? Let’s find out.
Negative Estimate Revisions
The estimates for the company for second-quarter 2017, fiscal 2017 and fiscal 2018, have moved been revised downward in the past 60 days, reflecting the negative outlook of analysts. For the second quarter, the estimate has gone down 44% to 37 cents per share in the past 60 days.
For fiscal 2017, the estimate has dropped 32% to $1.77 in the past 60 days. For fiscal 2018, the estimate has declined 15% to $2.46 per share.
Negative Surprise History
In the trailing four quarters, the company posted an average negative earnings surprise of 0.55%.
Underperforming the Industry
Sealed Air’s stock has increased 1.3% in the past one year, grossly underperforming the Zacks categorized Containers – Paper/ Plastics sub industry’s gain of 23.4%.
Near-Term Headwinds Remain
For 2017, Sealed Air expects sales of $4.3 billion. The guidance reflects an expected 3% constant dollar sales growth in Food Care and 3–4% constant dollar sales growth in Product Care. Currency will negatively impact 2017 net sales by $35 million. Adjusted EBITDA is estimated to be approximately $825 million and adjusted earnings per share is likely to be around $1.70 for 2017. This includes the impact of the pending sale of Diversey.
In 2017, volume growth will be partially offset by higher raw material costs, a higher mix of e-commerce and fulfillment sales, along with the impact of functional support and related expenses previously allocated to Diversey that did not qualify for discontinued operations. Further, costs associated with the Diversey Care operations and various restructuring actions underway will strain margins.
Sealed Air’s results in APAC will be impacted as the Australia/New Zealand region rebuilds cattle herds, which is normally a two to four-year process and dairy markets remain muted. The company generates around 33% of total company sales from the European region. The company anticipates that the recent geopolitical events in Europe and the Middle East to have an effect on business.
Sealed Air experienced positive volume trends in Latin America led by 2% volume growth in food care segment. This was the first time since first-quarter 2014 that volume contributed to sales growth in this region. However, the selective ban on the Brazilian beef export will stall the recovery in this local market and negatively impact volumes in the second and third-quarters 2017.
In the product-care segment, growth in the top line is not translating to bottom-line growth as the company could not match suppliers’ price increases in resin and other raw products with price increases. Sealed Air is witnessing quick growth in online products, but many of those products are selling at lower margins.
Unfavorable Zacks Rank, Style Score
Sealed Air currently carries a Zacks Rank #5 (Sell) and a VGM Score of “D”. Here 'V' stands for Value, 'G' for Growth and 'M' for Momentum. The company’s score is a weighted combination of these three scores (Value - F, Growth - D, Momentum - A). A score of ‘A’ or ‘B’ is generally considered favorable and allow investors to rule out the negative aspects of stocks and select the valuable picks.
Stocks to Consider
Better-ranked stocks in the same space include AGCO Corporation (AGCO - Free Report) , Altra Industrial Motion Corp. and AptarGroup, Inc. (ATR - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters.
Altra Industrial Motion generated an average positive earnings surprise of 15.93% in the past four quarters.
AptarGroup has an average positive earnings surprise of 1.78% in the last four quarters.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>