Sealed Air Corporation (SEE - Free Report) has been making steady progress on its reformation plan — Reinvent SEE Strategy that is focused on driving earnings growth. Acquisitions and product innovation also remain growth drivers. The company is also witnessing robust demand for packaging for food, medical supplies and consumer staples, and rise in e-commerce demand amid the coronavirus pandemic.
At present, Sealed Air carries a Zacks Rank #2 (Buy). It has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold), offer the best investment opportunities for investors. You can see the complete list of today's Zacks #1 Rank stocks here.
In the past three months, the stock has gained 23.9%, compared with the industry’s rally of 10.5%.
Let’s check out the factors that make the stock an attractive bet.
Better-Than-Expected Q2 Results: Sealed Air reported second-quarter 2020 adjusted earnings per share of 76 cents, which beat the Zacks Consensus Estimate of 54 cents. Further, total revenues of $1,151 million surpassed the Zacks Consensus Estimate of $1,076 million.
Positive Earnings Surprise History: Sealed Air beat estimates in each of the trailing four quarters, the average surprise being 17.9%.
Upbeat Growth Estimates: Sealed Air’s earnings have witnessed growth over the past two years. The momentum is expected to continue as the Zacks Consensus Estimate for the company’s current year’s earnings suggests year-over-year growth of 3.6%. The estimate for the next year indicates year-over-year improvement of 5.9%.
The stock has long-term expected earnings per share growth rate of 6.5%.
Northbound Earnings Estimate: Sealed Air’s current year earnings estimates have been revised upward by 9% to $2.92 per share over the past 60 days. The same for 2021 has moved 10% north to $3.09.
Upbeat Earning Guidance: Sealed Air expects adjusted earnings per share guidance for 2020 to be $2.85-$2.95. The mid-point of the guidance range reflects an improvement of 3% from earnings of $2.82 in 2019.
Return on Assets: Sealed Air currently has a Return on Assets (ROA) of 7.9%, while the industry recorded ROA of 4.9%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.
Pandemic-Driven Demand to Fuel Top Line: Around 65% of Sealed Air’s revenues come 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. Further, e-commerce sales, which contribute around 13% to the company’s sales, have been on the rise amid the stay-at-home scenario.
Reinvent SEE Strategy to Boost Earnings: In December 2018, Sealed Air announced a reformation plan, Reinvent SEE Strategy, and a fresh restructuring program in a bid to drive growth and earnings. The strategy is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements. The company is on track to realize 110 million of incremental benefits to adjusted EBITDA in 2020 compared with last year. Over the 2019-2021 timeframe, the company has targeted approximately $330 million of Reinvent SEE benefits. This will continue to drive the bottom line.
Acquisitions & Innovation: Sealed Air’s recent acquisitions including Automated Packaging Systems, AFP, Inc. and Fagerdala will drive growth. The company’s top line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations, strong fresh food markets and e-commerce sector.
Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include Astec Industries, Inc. (ASTE - Free Report) , Silgan Holdings, Inc. (SLGN - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec sports a Zacks Rank #1, Silgan and SiteOne carry a Zacks Rank of 2, currently.
Astec has an estimated earnings growth rate of 13.5% for the ongoing year. The company’s shares have rallied 68.5% in a year’s time.
Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have appreciated 32.9% over the past year.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has surged 61.6% in the past year.
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