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Sealed Air Rides on Favorable Demand, Currency Headwinds Ail

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On Aug 6, we issued an updated research report on Sealed Air Corporation (SEE - Free Report) . The company is expected to benefit from focus on innovations, growth in fresh food and e-commerce markets, restructuring actions and acquisitions. However, currency headwinds and increasing raw material prices remain headwinds for Sealed Air.
Sealed Air Beats Q2 Earnings, Revenue Estimates
The company recently delivered second-quarter 2018 results wherein adjusted earnings per share of surged 88% year over year to 64 cents. Total revenues increased 8% year over year on a reported basis to 1,155 million in the quarter. Sales increased across all regions in the quarter.
Upbeat Outlook for 2018
Expected benefits from reducing costs, driving operational excellence and commercializing new innovations combined with favorable global business trends positions the company well for improved 2018 results. Sealed Air projects net sales of approximately $4.75 for 2018, a constant dollar growth rate of approximately 7%, higher than the previously expected 4.5%. Adjusted earnings per share are anticipated to be $2.45-$2.55, the mid-point of which reflects healthy year-over-year growth of 38%.
Innovations, Acquisitions to Boost Results
Sealed Air's top-line will be supported by enhanced demand for its core product portfolio, recently-introduced innovations and strong fresh food markets along with the e-commerce sector. The company is witnessing increased demand for essential and high-performing packaging solutions that extend shelf life, reduce waste and drive customer productivity. The company should benefit from the commercialization of new products. Sealed Air is winning new customers globally given its innovative platforms including the Internet of Things, Intellibot robotics, clean-in-place solutions, biodegradable chemistry, dry lube and others.
Sealed Air acquired Fagerdala Singapore Pte Ltd., a manufacturer and fabricator of polyethylene foam, which is expected to considerably expand its presence in Asia. Notably, Fagerdala’s proficiency in foam manufacturing and fabrication is likely to enable Sealed Air to offer a full portfolio of differentiated solutions such as automated fulfillment systems and operational excellence consultative services to its consumers.
The company also recently acquired AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions. The buyout complements the Fagerdala acquisition and expands Sealed Air’s protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications.
Restructuring to Aid Margins
The company is focusing on creating profitable growth, driving operational excellence, and developing a high-performance organization in order to deliver long-term value. The company is also focusing on reducing cost structure. Through the Sealed Air Restructuring Program, it expects to generate incremental cost savings of $130-$150 million per annum by the end of 2019.
Currency and Cost Headwinds Ail
For 2018, currency headwinds are anticipated to negatively impact net Sales and adjusted EBITDA by $20 million and $5 million, respectively. Moreover, increasing raw material prices remain headwinds. Further, Sealed Air continues to invest in R&D, sales and marketing. Even though these investments will drive future growth, it will affect margins in the near term.
In the past year, shares of Sealed Air have declined 4% against the industry’s growth of 4%.
Sealed Air carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the same sector include Actuant Corporation (ATU - Free Report) , Caterpillar Inc. (CAT - Free Report) and Chart Industries, Inc. (GTLS - 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.
Actuant has a long-term earnings growth rate of 15.6%. The stock has rallied 17% in a year’s time.
Caterpillar has a long-term earnings growth rate of 13.3%. Its shares have been up 22% in the past year.
Chart Industries has a long-term earnings growth rate of 26.9%. The company’s shares have appreciated 124% over the past year.
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