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Sealed Air (SEE) Q2 Earnings Miss Estimates, '21 View Up

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Sealed Air Corporation (SEE - Free Report) reported second-quarter 2021 adjusted earnings per share of 79 cents, missing the Zacks Consensus Estimate of 80 cents. The bottom line, however, improved 4% year over year.

Including special items, the company delivered net earnings per share of 71 cents compared with the prior-year quarter figure of 64 cents.

Total revenues were up 15.4% year over year to $1,329 million in the reported quarter, highlighting healthy demand for automated and sustainable packaging solutions. Further, the top line beat the Zacks Consensus Estimate of $1,272 million.

Cost and Margins

Cost of sales climbed 21.8% year over year to $928 million. Gross profit increased 3% year over year to $401 million. Gross margin contracted to 30.1% from the prior-year quarter’s 33.8%.

SG&A expenses flared up 4% to $192 million year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $263 million in the quarter, up 1% from the prior-year period. Adjusted EBITDA margin was 19.7% compared with the prior-year quarter’s 22.5%. Benefits from higher sales and productivity were offset by supply-chain disruptions and inflationary pressure.

Sealed Air Corporation Price, Consensus and EPS Surprise

Sealed Air Corporation Price, Consensus and EPS Surprise

Sealed Air Corporation price-consensus-eps-surprise-chart | Sealed Air Corporation Quote

Segment Performance

Food: Net sales jumped 9% year over year to $737 million. The company witnessed strength in automation and year-over-year higher food service demand. Adjusted EBITDA was down 6.5% year over year to $158 million. Volume growth and productivity improvements were offset by negative price/cost related to higher input costs. The segment also incurred higher freight costs to meet increased customer demand, while managing global supply disruptions.

Protective: The segment reported net sales of $592 million during the quarter under review, up 24% from the prior-year period led by continued strength in e-Commerce and automation, coupled with year-over-year higher industrial demand. Adjusted EBITDA advanced 17% year over year to $107 million on sales growth, partially negated by negative price/cost.

Financial Updates

Cash flow from operating activities was $199.5 million in the six-month period ended on Jun 30, 2021 compared with the year-ago period’s $213 million. During the reported quarter, Sealed Air hiked quarterly cash dividend by 25% to 20 cents per share.

The company paid cash dividends of $56 million during the first six months of 2021 and repurchased $299 million shares. On Aug 2, Sealed Air’s board authorized a new share-repurchase program of $1 billion.

As of Jun 30, 2021, Sealed Air’s net debt was $3.5 billion, up from $3.2 billion as of Dec 31, 2020. As of the end of the quarter, the company had $1.4 billion of liquidity available, which comprised $273 million in cash and $1,144 million of undrawn, committed credit facilities.

2021 Guidance Updated

For 2021, Sealed Air expects net sales in the range of $5.4 billion to $5.5 billion, higher than the prior expectation of $5.25 billion to $5.35 billion. This indicates an increase of 10-12% as reported and 8-10% in constant dollars.
The company expects adjusted EBITDA to lie between $1.12 billion and $1.15 billion for the current year. The adjusted earnings per share are now anticipated in the band of $3.45 to $3.60. The company had earlier provided a guidance range of $3.40-$3.55. Sealed Air projects free cash flow to be between $520 million and $570 million for the current year.

Share Price Performance

Over the past year, Sealed Air’s shares have gained 56.4% compared with the industry’s growth of 29%.

Zacks Investment Research
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Zacks Rank and Stocks to Consider

Sealed Air currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Industrial Products sector include Greif, Inc. (GEF - Free Report) , Lindsay Corp. (LNN - Free Report) and Pentair plc (PNR - Free Report) . While Greif and Lindsay sport a Zacks Rank #1 (Strong Buy) Pentair carries a Zacks Rank #2 (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 29.9%, in the past year.

Lindsay has an estimated earnings growth rate of 1% for the ongoing fiscal year. In a year's time, the company’s shares have rallied 22.3%.

Pentair has a projected earnings growth rate of 26% for 2021. The stock has appreciated 36.7%, over the past year.


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