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Sealed Air (SEE) Bets on Strong Demand Amid High Costs
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Sealed Air Corporation’s (SEE - Free Report) top line is benefiting from ongoing strength in packaging demand for food, medical supplies and consumer staples, and surge in e-commerce demand amid the coronavirus pandemic. Anticipated benefits from its Reinvent SEE Strategy will contribute to earnings growth and help negate the impact of inflated input costs. Acquisitions, product innovation and investment in automation will favor results.
Sealed Air has an expected long-term earnings per share growth rate of 8.7%. The company has a trailing four-quarter earnings surprise of 21.4%, on average.
Strong Demand to Offset High Costs
For 2021, Sealed Air expects net sales in the range of $5.25 billion to $5.35 billion, which indicates an improvement of 7% to 9% as reported and 6% to 8% in constant dollars, driven by increased volume and prices. While the Food segment is expected to deliver 4-6% constant dollar growth, the Protected packaging segment is anticipated to deliver 8-10% growth. Adjusted earnings per share is expected between $3.40 and $3.55. The mid-point of the range suggests year-over-year growth of 9%.
Sealed Air’s margins will be impacted by higher raw material costs and freight costs. This is likely to be mitigated by strong demand for food, medical supplies, consumer staples, and surge in e-commerce demand amid the COVID-19 pandemic. Its 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 remains high. It is gaining from growth in online shipments of medical equipment and pharmaceuticals. Demand for temperature assurance packaging solution that ensures safe and secure distribution of COVID-19 vaccines remains high. E-commerce sales have been on the rise amid the stay-at-home scenario.
Reinvent SEE Strategy to Benefit Earnings
Sealed Air’s Reinvent SEE Strategy, which is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements, has been instrumental in driving earnings growth. One of most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets. In 2021, the company is on track to realize benefits of around $65 million from the program.
Investing in Growth Areas
Sealed Air’s focus on automation, digital and sustainability is expected to drive above-market growth in its core business, enabling it to expand into new and adjacent markets. The company is meeting customers' most critical needs for safety, productivity and labor scarcity with its touchless automated solutions. It expects equipment sales to grow 12% in 2021 to over $250 million. Its pipeline for automated equipment continues to improve, and Sealed Air has set a target of over $500 million by 2025.
In 2019, the company had acquired Automated Packaging Systems, a leading manufacturer of high-reliability, automated bagging systems, which expanded the breadth of its automated solutions and sustainable packaging offerings. Sealed Air recently announced that it is making capital investments of more than $30 million to broaden its global production capacity and invest in new equipment to fulfill the surging demand for Automated Packaging Systems Autobag solutions. The acceleration of e-commerce driven by the pandemic has increased demand for automated packaging solutions across multiple end markets including e-retailers, consumer goods, medical supplies, industrials, and food.
Price Performance
The stock has gained 70.5% in a year’s time, compared with the industry’s growth of 34.3%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Sealed Air currently carries a Zacks Rank #3 (Hold).
Image: Shutterstock
Sealed Air (SEE) Bets on Strong Demand Amid High Costs
Sealed Air Corporation’s (SEE - Free Report) top line is benefiting from ongoing strength in packaging demand for food, medical supplies and consumer staples, and surge in e-commerce demand amid the coronavirus pandemic. Anticipated benefits from its Reinvent SEE Strategy will contribute to earnings growth and help negate the impact of inflated input costs. Acquisitions, product innovation and investment in automation will favor results.
Sealed Air has an expected long-term earnings per share growth rate of 8.7%. The company has a trailing four-quarter earnings surprise of 21.4%, on average.
Strong Demand to Offset High Costs
For 2021, Sealed Air expects net sales in the range of $5.25 billion to $5.35 billion, which indicates an improvement of 7% to 9% as reported and 6% to 8% in constant dollars, driven by increased volume and prices. While the Food segment is expected to deliver 4-6% constant dollar growth, the Protected packaging segment is anticipated to deliver 8-10% growth. Adjusted earnings per share is expected between $3.40 and $3.55. The mid-point of the range suggests year-over-year growth of 9%.
Sealed Air’s margins will be impacted by higher raw material costs and freight costs. This is likely to be mitigated by strong demand for food, medical supplies, consumer staples, and surge in e-commerce demand amid the COVID-19 pandemic. Its 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 remains high. It is gaining from growth in online shipments of medical equipment and pharmaceuticals. Demand for temperature assurance packaging solution that ensures safe and secure distribution of COVID-19 vaccines remains high. E-commerce sales have been on the rise amid the stay-at-home scenario.
Reinvent SEE Strategy to Benefit Earnings
Sealed Air’s Reinvent SEE Strategy, which is focused on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements, has been instrumental in driving earnings growth. One of most vital aspects of this strategy involves investment in technology and resources focusing on new and existing high-growth markets. In 2021, the company is on track to realize benefits of around $65 million from the program.
Investing in Growth Areas
Sealed Air’s focus on automation, digital and sustainability is expected to drive above-market growth in its core business, enabling it to expand into new and adjacent markets. The company is meeting customers' most critical needs for safety, productivity and labor scarcity with its touchless automated solutions. It expects equipment sales to grow 12% in 2021 to over $250 million. Its pipeline for automated equipment continues to improve, and Sealed Air has set a target of over $500 million by 2025.
In 2019, the company had acquired Automated Packaging Systems, a leading manufacturer of high-reliability, automated bagging systems, which expanded the breadth of its automated solutions and sustainable packaging offerings. Sealed Air recently announced that it is making capital investments of more than $30 million to broaden its global production capacity and invest in new equipment to fulfill the surging demand for Automated Packaging Systems Autobag solutions. The acceleration of e-commerce driven by the pandemic has increased demand for automated packaging solutions across multiple end markets including e-retailers, consumer goods, medical supplies, industrials, and food.
Price Performance
The stock has gained 70.5% in a year’s time, compared with the industry’s growth of 34.3%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Sealed Air currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , Lindsay Corporation (LNN - Free Report) and Pentair plc (PNR - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Greif has an anticipated earnings growth rate of 47.2% for fiscal 2021. The company’s shares have gained around 79% over the past year.
Lindsay has an estimated earnings growth rate of 1% for the ongoing fiscal year. Over the past year, the company’s shares have rallied 75%.
Pentair has a projected earnings growth rate of 26% for the current year. The stock has appreciated around 80% in a year.