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Sealed Air (SEE) Beats Q2 Earnings, Revenue Estimates

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Sealed Air Corporation (SEE - Free Report) delivered second-quarter 2018 adjusted earnings per share of 64 cents, surging 88% year over year and beating the Zacks Consensus Estimate of 58 cents.

Including special items, the company reported net earnings of 52 cents, up from net earnings of 14 cents in the year-ago quarter.

Total revenues increased 8% year over year on a reported basis to 1,155 million in the quarter. The figure beat the Zacks Consensus Estimate of $1,152 million. Currency had a positive impact on total net sales of $8 million or 1%. Sales increased across all regions in the quarter.

Sealed Air Corporation Price, Consensus and EPS Surprise

Sealed Air Corporation Price, Consensus and EPS Surprise | Sealed Air Corporation Quote

Cost and Margins

Cost of sales rose 8.9% year over year to $792 million. Gross profit went up 5.8% to $364 million. Gross margin contracted 60 basis points (bps) to 31.5% in the quarter.

SG&A expenses fell roughly 5% to $193 million from the prior-year quarter’s figure. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $218 million in the quarter compared with $196 million in the prior-year quarter. Adjusted EBITDA margin was 18.8% compared with 18.3% in the prior-year quarter.

Segment Performance

Food Care: Net sales advanced 5% year over year on reported and a constant dollar basis to $713 million. Adjusted EBITDA increased 3% year over year to $135 million. Currency had an unfavorable impact of $1 million on Adjusted EBITDA.

Product Care: The segment reported net sales of $442 million, up 13% year over year and 11% on a constant dollar basis, primarily driven by the acquisition of Fagerdala, favorable price/mix and slight increase in volume. Currency had a positive impact on Product Care’s net sales of 2% or $8 million. Adjusted EBITDA increased 13% to $79 million.

Financial Updates

Cash and cash equivalents were $180 million as of Jun 30, 2018, down from $298 million as of Jun 30, 2017. Cash flow from operating activities was around $37 million in the reported quarter compared with $141 million in the prior-year quarter.

As of Jun 30, 2018, Sealed Air’s net debt came in at $3.2 billion, up from $2.7 billion as of Dec 31, 2017 owing to use of working capital and amounts paid for share repurchases.

From Apr 1, 2018 to Jul 31, 2018, the company repurchased around 2.9 million shares or $125 million, bringing aggregate repurchase for the year to roughly 11.7 million shares or $530 million.

Sealed Air’s board of directors reset the company’s share repurchase program authorization on May 2, 2018, to $1 billion. This program has no expiration date and replaces the previous authorizations, representing an increase of nearly $500 million. The company has around $900 million remaining under the current share repurchase authorization.

Guidance

Sealed Air projects net sales of roughly $4.75 billion for 2018, at a constant dollar growth rate of approximately 7% and up from the previous expectation of 4.5%. Adjusted EBITDA from continuing operations is expected in the range of $890-$910 million, unchanged from the previous forecast. Adjusted earnings per share are projected at $2.45-$2.55, unchanged from the previous guidance.

The company continues to expect free cash flow for 2018 at around $400 million, based on assumption of capital expenditures of approximately $160 million.

Price Performance

Over the past three months, Sealed Air has underperformed the industry . The stock has declined 0.7%, against the industry’s rise of 2.2%.



Zacks Rank & Stocks to Consider

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

A few better-ranked stocks worth considering in the same sector are W.W. Grainger, Inc. (GWW - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and iRobot Corp. (IRBT - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Grainger has a long-term earnings growth rate of 12.5%. The stock has appreciated 101.8% in a year’s time.

Chart Industries has a long-term earnings growth rate of 26.9%. The company’s shares have been up 131.4% in a year.

iRobot has a long-term earnings growth rate of 19.5%. Its shares have rallied 38.2% in the past three months.

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