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Sealed Air (SEE) Q3 Earnings Beat Estimates, Lowers '22 View

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Sealed Air Corporation (SEE - Free Report) reported third-quarter 2022 adjusted earnings per share of 98 cents, which surpassed the Zacks Consensus Estimate of 91 cents. The bottom line figure improved 14% year over year as favorable net price realization and productivity improvements helped offset the impact of lower volumes.

Including special items, the company delivered net earnings per share of 91 cents compared with the prior-year quarter’s 71 cents.

Total revenues were $1,400 million in the reported quarter, flat with the year-ago quarter. The top line missed the Zacks Consensus Estimate of $1,470 million. Currency had an unfavorable impact of 5%, while price had a favorable impact of 13%. Meanwhile, volumes were down 7%.

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

Sales in America rose 3% year on year, while EMEA and APAC witnessed declines of 6% and 5%, respectively.

Cost and Margins

Cost of sales declined 3.6% year over year to $967 million. Gross profit was $434 million, which marked a 7% improvement from the year-ago quarter’s $404 million. The gross margin expanded to 31% from the prior-year quarter’s 28.7%. Selling, general and administrative expenses increased by 3% from the last-year quarter to $196 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was around $293 million in the quarter, which increased 8% from the prior-year period. Adjusted EBITDA margin was 20.9% compared with the prior-year quarter’s 19.2% as favorable net price realization offset lower volume.

Segment Performance

Food: Net sales increased 4% year over year to $830 million. Volumes were down 4%, owing to food retail market declines across the Americas and EMEA regions and the adverse impact from prior supply disruptions. Pricing actions had a favorable impact of 13%.

Currency fluctuations had an unfavorable impact of 5%. Adjusted EBITDA was $185.3 million, up 9% from the last year’s quarter, as favorable price realization and productivity improvements helped offset the impact of lower volumes.

Protective: The segment reported net sales of $571 million during the quarter under review, down 6% from the prior-year quarter. The divestiture of Reflectix had an unfavorable impact of 2%, while currency impacted sales by 5%.

Pricing had a positive impact of 12%, while volumes slumped by 12% owing to recessionary pressures in the industrial and fulfillment markets. The segment’s adjusted EBITDA increased 6.6% year over year to $109 million as favorable net price realization helped offset lower volumes.

Financial Updates

Cash flow from operating activities was around $321 million in the first nine-month period of 2022 compared with $378 million in the prior-year comparable period. The company paid cash dividends of $90 million in the first nine-month period of 2022 and repurchased 4.5 million shares.

As of Sep 30, 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 third quarter of 2022, the company had $1.4 billion of liquidity available, which comprised $249 million in cash and $1.12 billion of undrawn, committed credit facilities.

2022 Guidance

For 2022, Sealed Air expects net sales between $5.65 billion and $5.75 billion, down from its earlier provided range of $5.85 to $6.05 billion. The company anticipates adjusted EBITDA in the range of $1.21 to $1.23 billion, revised from the prior range of $1.22 to $1.25 billion

Adjusted earnings per share is now forecast in the band of $4.05 to $4.15. The company had earlier provided a range of $4.05 to $4.20. Sealed Air lowered its free cash flow expectations to $460 to $500 million, from the earlier stated $510-$550 million for the ongoing year.

Share Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

In a year's time, Sealed Air’s shares have declined 21.5% compared with the industry’s fall of 17.8%.

Zacks Rank and Stocks to Consider

Sealed Air currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Industrial Products sector are Tenaris (TS - Free Report) , Enerpac Tool Group Corp. (EPAC - Free Report) and Reliance Steel & Aluminum Co. (RS - Free Report) . While TS and EPAC sport a Zacks Rank #1 (Strong Buy), RS carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Tenaris delivered a trailing four-quarter earnings surprise of 34%, on average. The Zacks Consensus Estimate for the company for 2022 indicates year-over-year growth of around 120%. The estimate has moved up 3% in the past 60 days. The TS stock has risen 36% in the past year.

Enerpac Tool delivered a four-quarter earnings surprise of 3.4%, on average. EPAC’s earnings estimates have increased 9% for fiscal 2023 (ending August 2023) in the past 60 days. The estimate indicates year-over-year growth of 44.6%. EPAC’s shares have gained 18% in the past year.

Reliance Steel & Aluminum’s earnings surprise in the last four quarters was 13.4%, on average. It has an expected earnings growth rate of 27.9% for fiscal 2022. The earnings estimates have moved up 0.1% over the past 60 days. The RS stock has gained 34% in the past year.

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