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Sealed Air (SEE) Gains from Healthy Demand Amid Rising Costs

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Sealed Air Corporation (SEE - Free Report) is benefiting from strong demand for its automated equipment and sustainable packaging solutions. Anticipated benefits from its Reinvent SEE Strategy, focus on acquisitions and product innovations will also stoke growth.

The company has a trailing four-quarter average earnings surprise of 10.9%.

Segments Poised to Grow on Solid End-Market Demand

Strong demand for automated equipment and sustainable packaging solutions continues to drive growth in the food and protected packaging segments. In food, the retail channel and protein exports are expected to be solid. Sealed Air has been witnessing higher food service demand compared to last year owing to the reopening of restaurants and other public venues. In fact, its fluid solutions portfolio, which comprises Cryovac Barrier Bags and pouches for condiments, soups and sauces, is seeing growth on this demand rebound. The Food segment’s 50% of sales are generated from these categories. In protective, continued growth in e-commerce and fulfillment, and higher demand in the industrial end markets are likely to fuel growth. E-commerce sales, which contribute around 14% to the company’s sales, have been on the rise amid the stay-at-home scenario.

Reinvent SEE Strategy to Drive Margin

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 driving its earnings growth. One of the most vital aspects of this strategy involves investment in technology and resources, and focusing on the new and existing high-growth markets. The company achieved $28-million benefits from Reinvent SEE in the first half of the current year and is on track to realize benefits of around $65 million in the remaining period of the year.

Focus on Investments in Automated Equipment

Sealed Air’s focus on automation, digital and sustainability is likely to boost market-topping growth in its core business, allowing it to expand into new and adjacent markets. The company’s SEE automated solutions strategy is driving growth for the next phase of its Reinvent SEE business transformation. Sealed Air is meeting customers' most critical needs for safety, productivity and labor scarcity with its touchless automated solutions. It expects equipment sales to be up 12% in 2021 to more than $250 million. The company’s pipeline for automated equipment continues to improve, and it has set a target of more than $500 million by 2025. Sealed Air is investing more than $30 million in capacity expansion to meet the strong demand for equipment solutions. These investments, along with the company’s acquisitions of Automated Packaging Systems, AFP, Inc, and Fagerdala will stoke growth.

Meanwhile, Sealed Air’s margins continue being affected by the rising raw material and freight costs. Therefore, the company announced to hike prices by 5-10% across all products effective Sep 15 to counter the impact of rising input costs. Some other prominent companies in the Industrial Products sector like Greif, Inc. (GEF - Free Report) , Amcor PLC (AMCR - Free Report) and Berry Global Group, Inc. (BERY - Free Report) are also implementing cost-control actions due to the rising raw-material costs.

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