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Sealed Air's (SEE) Earnings Trump Estimates in Q2, View Up

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Sealed Air Corporation (SEE - Free Report) delivered second-quarter 2019 adjusted earnings per share of 80 cents, surpassing the Zacks Consensus Estimate of 64 cents and improving 25% year over year. Results can be attributed to strong execution of the company’s Reinvent SEE strategy which was introduced in December 2018 to drive growth and earnings power.

Including special items, the company reported net earnings per share of 16 cents compared to the prior-year quarter’s 52 cents.

Total revenues went up to $1,161 million in the reported quarter from the year-ago quarter’s $1,155 million. The figure, however, missed the Zacks Consensus Estimate of $1,167 million. Unfavorable currency impact lowered total net sales by $41 million.

Cost and Margins

Cost of sales edged down 1.1% year over year to $782.7 million. Gross profit improved 4% year over year to $378.3 million. Gross margin came in at 32.6% compared with 31.4% in the comparable period last year.
 
SG&A expenses flared up 38% to $266.2 million, year on year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $237 million in the quarter compared with $218 million reported in the prior-year quarter. Adjusted EBITDA margin was 20% compared with 19% in the prior-year quarter, driven by the company’s Reinvent SEE initiatives, productivity improvement and restructuring savings, partly offset by higher operating costs.

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

Segment Performance

Food Care: Net sales dipped to $711 million during the June-end quarter, from $713 million in the prior-year period. Adjusted EBITDA increased 15% year over year to $155.6 million.
 
Product Care: The segment reported net sales of $450 million in the reported quarter compared with $442 million in the prior-year quarter. Adjusted EBITDA was up 7% to $84 million.

Financial Updates

Cash and cash equivalents were $222.2 million as of Jun 30, 2019, down from $271.7 million as of Dec 31, 2018. Cash flow from operating activities was around $169.3 million in six-month period ended Jun 30, 2019 compared with $36.6 million in the prior year comparable period.

As of Jun 30, 2019, Sealed Air’s net debt came in at $3.36 billion, up from $3.20 billion as of Dec 31, 2018. In the first-half 2019, the company repurchased 1,560,000 shares for $67 million and paid dividends worth $50 million.

Acquisition

Sealed Air has completed the acquisition of Automated Packaging Systems, Inc. (“APS”) for $510 million. The acquisition will strengthen its portfolio to drive growth in e-commerce, fulfillment and food packaging markets. Sealed Air is expected to generate around $15 million annualized, run-rate productivity synergies by the end of 2021.

Guidance
 
Sealed Air has updated its guidance for current year. The company now projects adjusted earnings per share at $2.70-$2.80 compared with the prior projection of $2.65-$2.75.
 
Net sales are projected at $4.85 billion compared with the previous estimate of $4.8 billion. Acquisitions are expected contribute $190 million towards revenues, of which APS will contribute approximately $120 million. Adjusted EBITDA is estimated to lie between $950 and $960 million compared with the prior guided $925 million - $945 million. Nevertheless, currency is anticipated to have an unfavorable impact of approximately $130 million on net sales and $25 million on adjusted EBITDA.

Zacks Rank & Stocks to Consider

Sealed Air currently carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the Industrial Products sector are John Bean Technologies Corp. (JBT - Free Report) , CECO Environmental Corp. (CECE - Free Report) and Roper Technologies, Inc. (ROP - Free Report) . While John Bean Technologies and CECO Environmental sport a Zacks Rank #1 (Strong Buy), Roper Technologies carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here

John Bean Technologies has an expected earnings growth rate of 5.9% for the current year. The stock has appreciated 10.8% in a year’s time.

CECO Environmental has an impressive projected earnings growth rate of 84.8% for the ongoing year. The company’s shares have rallied 36.3% over the past year.

Roper Technologies has an estimated earnings growth rate of 9.8% for 2019. The company’s shares have gained 23.3% in the past year.

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