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Here's Why Sealed Air (SEE) Stock is an Attractive Pick Now

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Sealed Air Corporation (SEE - Free Report) is gaining from continued strength in packaging demand for food, medical supplies and consumer staples as well as surging e-commerce activities. The company’s focus on investment in capacity expansion to meet strong demand for automated equipment and sustainable packaging solutions and benefits from Reinvent SEE Strategy makes it an attractive investment option.

The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's discuss the factors that make the Sealed Air stock a compelling investment option at the moment.

Impressive Price Performance

Sealed Air’s shares have gained 43.5% in the past year compared with the industry’s growth of 10.6%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Upbeat Growth Projections

The Zacks Consensus Estimate for earnings for 2022 is currently pegged at $4.14, which suggests year-over-year growth of 16.2%. The estimate has been revised upward by 1.2% in the past 60 days.

Cheap Valuation

Sealed Air’s trailing 12-month EV/EBITDA ratio is 12.5, while the industry's average trailing 12-month EV/EBITDA is 20.2. The stock is cheaper at this point based on the ratio.

Return on Assets (ROA)

Sealed Air currently has a ROA of 8.5%, while the industry recorded an ROA of 6.6%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Other Growth Drivers

Strong demand for automated equipment and sustainable packaging solutions continues to drive Sealed Air’s food and protected packaging segments’ growth. In food, the retail channel and protein exports are expected to be solid. Its protein automation pipeline continues to grow across all regions, with major food producers committing to its SEE Touchless Automation future. The company is witnessing year-over-year higher foodservice demand owing to the reopening of restaurants and other public venues. Backed by this, its fluid solutions portfolio, comprising Cryovac Barrier Bags and pouches for condiments, soups and sauces, is witnessing growth. In the protective segment, continued growth in e-commerce and fulfillment and higher demand in the industrial end markets are likely to drive performance. E-commerce sales, which contribute around 14% to the company’s sales, have been on the rise amid the stay-at-home scenario.

Given the surging demand for recyclable materials, fiber-based solutions and automated packaging, Sealed Air’s focus on automation, digital and sustainability is likely to boost market-beating growth in its core business, enabling 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. The company meets customers' most critical safety, productivity and labor scarcity needs with its touchless automated solutions. Sealed Air’s pipeline for automated equipment continues to improve and it has set a target of more than $500 million by 2025. It 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.

Sealed Air’s Reinvent SEE Strategy, which focuses on innovations, SG&A productivity, product-cost efficiency, channel optimization and customer-service enhancements, is contributing to earnings. One of the most vital aspects of this strategy involves investing in technology and resources and focusing on the new and existing high-growth markets. The company is on track to realize the benefits from Reinvent SEE of around $65 million for full-year 2021.

Stocks to Consider

A few other top-ranked stocks in the Industrial Products sector are Berry Global Group, Inc. (BERY - Free Report) , ScanSource, Inc. (SCSC - Free Report) and MSC Industrial Direct Co., Inc. (MSM - Free Report) . While BERY flaunts a Zacks Rank #1, SCSC and MSM carry a Zacks Rank #2.

Berry Global Group has an estimated earnings growth rate of around 2.8% for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 18%.

In a year, the company’s shares have increased 30.5%. Berry Global Group has a trailing four-quarter earnings surprise of 16.5%, on average.

ScanSource has an expected earnings growth rate of 18.9% for fiscal 2022. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 0.9% in the past 60 days.

ScanSource’s shares have rallied 31.4% in the past year. SCSC has a trailing four-quarter earnings surprise of 34.7%, on average.

MSC Industrial has a projected earnings growth rate of 19.9% for fiscal 2022. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 2.9% in the past 60 days.

MSM’s shares have gained 5.5% in a year. MSC Industrial has a trailing four-quarter earnings surprise of 2.9%, on average.