On Aug 22, 2014, we issued an updated research report on Sealed Air Corporation (SEE - Free Report) . The packaging service provider will benefit from price hikes and acquisitions. However, decline in slaughter rate is a concern for the Food Care segment.
In Jul 2014, Sealed Air acquired the assets of Virox Technologies. Notably, Sealed Air is already connected to Virox through its Diversey Care business. The buyout will help the Diversey Care segment acquire a leading position in the U.S. and Canada, when it comes to offering infection prevention resources to healthcare professionals. As prospects of the global health care sector are positive for next few years, the acquisition bodes well for Sealed Air’s growth in the healthcare market.
Sealed Air announced a 5% price hike on certain products of its Product Care unit in North America on Aug 18. The price increase effective Oct 2014, will help to counter the persistent rise of raw material and other input costs. The company’s efforts of minimizing the impact of cost increases will help customers in the long term and help it in delivering an innovative product portfolio.
Further, as part of its ‘Change the Game’ strategy and in line with the intention of transforming into a knowledge-based company, Sealed Air has relocated its global headquarters to a new, state-of-the-art campus in Charlotte, NC. This move will create a stronger, one-company culture that will enable greater collaboration, accelerate innovation and drive operating efficiencies.
However, the decline in slaughter rate remains a concern for Sealed Air’s Food Care segment. The slaughter rate has witnessed a downtrend since the third week of June. The company anticipates that beef production will continue to fall in the second half of the year. Hog slaughters are also expected to be lower in the coming months.
Specifically, U.S. beef and pork production volumes remain under pressure by high single-digit declines that are rippling through the supply chain which may cause modest volume declines in food packaging this year and in turn affect the segment.
Additionally, growth in the Product Care segment was partly offset by a sales decline owing to rationalization and the lackluster economic environment in Europe in the second quarter 2014. Volumes in the segment will continue to be hurt by the ongoing product rationalization.
Moreover, economic uncertainty, unfavorable foreign currency translation and volatility in raw material price will continue to affect Sealed Air’s results in 2014.
Currently, Sealed Air sports a Zacks Rank #1 (Strong Buy).
Other Stocks that Warrant a Look
Other stocks to consider in the same industry include Graphic Packaging Holding Company (GPK - Free Report) , ACCO Brands Corporation (ACCO - Free Report) and AO Smith Corp. (AOS - Free Report) . All these stocks carry a Zacks Rank #2 (Buy).