Sealed Air (SEE) Poised To Grow Despite Weak Resin Prices

We issued an updated research report on Sealed Air Corporation (NYSE:SEE) on Aug 16, 2016. The company is set to benefit from focus on innovation, acquisitions, increased demand and effective cost management. However, unfavorable foreign currency translation, political unrest in the Middle East and weak resin prices remain challenges.

Notably, Sealed Air expects accelerated EBITDA growth in the second half of 2016 with the anticipation that the fourth quarter will be the strongest quarter of the year driven by higher Food Care volumes, customer rollout schedule in Diversey Care and seasonal strength in Product Care. For full-year 2016, the company’s focus on pricing and cost discipline will strengthen the chances of constant dollar EBITDA growth and margin expansion.

Adjusted EBITDA is estimated in the range of $1.17–$1.18 billion, taking into account the harmful effects of $45 million of unfavorable currency translation. It also projects adjusted EPS to skirt the higher end of its guidance range of $2.52–$2.60.

Sealed Air expects healthier performance in the second half supported by enhanced demand for its core product portfolio, recently-introduced innovations and accelerated growth in the global protein market and e-Commerce sector. Demand continues to increase for Inflatable Bubble, Korrvu, Sealed Air B+ and FloWrap equipment platform which is translating into robust double-digit growth in equipment sales and installments. In addition, the company believes that market differentiation of revolutionary innovation is gaining significant traction in each of its divisions.

The company is also investing in new solutions, including the recent acquisition of Finland-based TTS-Ciptec, a leading, cleaning place systems optimization company. This buyout complements Sealed Air’s expertise in remote monitoring and data analytics and will enhance its knowledge-based service offering.

However, Sealed Air reiterated its net sales guidance of approximately $6.85 billion for 2016. The impact from the Food Care divestitures on 2016 net sales is $102 million, of which $82 million hurt the first half of the year. Currency is expected to have an unfavorable influence on sales of approximately $275 million.

Further, the company anticipates the recent geopolitical events in Europe and the Middle East to have an effect on its business in the coming months. The company is seeing a slowdown in the business due to political unrest in the Middle East and economic weakness in Argentina. It expects the third quarter will experience a decline in growth versus the increase in quarter two due to significant slowdown in hospitality in Middle East, Africa.

Finally, Sealed Air expects that inflated resin cost and related impact on Food Care’s formula pricing will hamper its revenues. Food Care EBITDA will be affected by the accounting of raw material costs heading into year end. The company witnessed weak resin prices and expects to be weak for the year.

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

Stocks to Consider

Some better-ranked stocks in the same sector are Berry Plastics Group, Inc. (NYSE:BERY) , Packaging Corporation of America (NYSE:PKG) and ACCO Brands Corp. (NYSE:ACCO) . While Berry Plastics sports a Zacks Rank #1 (Strong Buy), Packaging Corporation of America and ACCO Brands, each, carry a Zacks Rank #2 (Buy).


SEALED AIR CORP (SEE): Free Stock Analysis Report

PACKAGING CORP (PKG): Free Stock Analysis Report

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

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