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Sealed Air (SEE) Down 9.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Sealed Air (SEE - Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sealed Air due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sealed Air Q1 Earnings Top Estimates, Raises FY22 View

Sealed Air reported first-quarter 2022 adjusted earnings per share of $1.12, which surpassed the Zacks Consensus Estimate of 92 cents. The bottom line figure improved 43.6% year over year on favorable price/cost spread and productivity improvements.

Including special items, the company delivered net earnings per share of $1.00 compared with the prior-year quarter’s 68 cents.

Total revenues were up 12% year over year to $1.42 million in the reported quarter. Sales in Americas surged 18% in the quarter followed by a 4% growth in EMEA. Meanwhile, sales in APAC were down 1%. Currency had an unfavorable impact of 3%, while price had a favorable impact of 16%. Volumes dipped 1%. The top line beat the Zacks Consensus Estimate of $1.39 billion.

Cost and Margins

Cost of sales climbed 9% year over year to $941 million. Gross profit was $477 million, which marked a 19% improvement from the year-ago quarter’s $401 million. Gross margin contracted to 33.6% from the prior-year quarter’s 31.7%.

The SG&A expenses increased 8.5% from the last-year quarter to $205 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was around $327 million in the quarter, which increased 22% from the prior-year period. Adjusted EBITDA margin was 23.1% compared with the prior-year quarter’s 21.2%, courtesy of favorable price/cost spread and productivity improvements, partially negated by labor and non-material inflation.

Segment Performance

Food: Net sales increased 15% year over year to $808 million. The segment reported a 1.5% increase in volumes across all regions, primarily aided by food service recovery. Adjusted EBITDA was $200 million, up 28% from the last year’s quarter on positive price/cost spread and productivity improvements. Higher labor and non-material cost inflation somewhat offset these gains.

Protective: The segment reported net sales of $610 million during the quarter under review, up 8% from the prior-year quarter. The divestiture of Reflectix and currency fluctuation had an unfavorable impact of 2% each. The segment’s adjusted EBITDA increased 16% year over year to $127 million, driven by favorable price/cost spread, partially offset by labor and non-material inflation.

Financial Updates

Cash flow from operating activities was $48 million in the first quarter of 2022 compared with the prior-year quarter’s $80 million. The company paid cash dividends of $31 million in the quarter under review and repurchased shares for $200 million.

As of Mar 31, 2022, Sealed Air’s net debt was $3.4 billion, up from $3.1 billion as of Dec 31, 2021. As of the end of the first quarter of 2022, the company had $1.4 billion of liquidity available, which comprised $278 million in cash and $1.14 billion of undrawn, committed credit facilities.

2022 Guidance

For 2022, Sealed Air expects net sales between $5.85 billion and $6.05 billion, compared with the prior expectation of $5.8 billion to $6.0 billion. It factors in an unfavorable currency impact of approximately 2% and an unfavorable divestiture impact of approximately 1%.

The company anticipates adjusted EBITDA between $1.22 billion to $1.25 billion, higher than the previously provided range of $1.20 billion to $1.24 billion. Adjusted earnings per share is now forecast in the band of $4.05 to $4.20 compared with the previous guidance of $3.95 to $4.15. Sealed Air projects free cash flow to be $510-$550 million for the ongoing year.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Sealed Air has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sealed Air has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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