By Sam Boughedda
Sealed Air (NYSE:SEE) was downgraded to Underweight from Neutral by JPMorgan analyst Jeffrey Zekauskas on Wednesday, although the analyst says it does not reflect pessimism concerning Sealed Air’s business prospects.
Zekauskas, who has a price target of $62 on the stock, said it reflects their inclination to invest in other equities in the various material sub-sectors.
"We think that market outperformance at this juncture is more likely to stem from equities where it is possible for earnings performance to be much higher than consensus values either through business performance or acquisition; equities that have unusually high free cash flow yields or other unusual value characteristics; and equities that carry unusual protection under recessionary conditions," the analyst wrote.
"We do not view the earnings of Sealed Air as being at particular risk. We do, however, think that it is difficult for the company to significantly outperform consensus estimates in a rising raw material and a slowing demand environment," he added.
The JPMorgan analyst explained that they do not view Sealed Air as particularly recession-resistant from an equity performance standpoint. However, they feel the company is interested in growing its equipment business through acquisition, which, depending on the size and valuation of possible acquisitions, "may increase the near-term risk in these high-quality shares."