On Jan 3, Zacks Investment Research upgraded Sealed Air Corporation (SEE) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Shares of Sealed Air got a lift as oil prices went into a free fall and hit a five-year low of $53.60 a barrel on Dec 16. Cheaper oil means lower gasoline prices. This, along with an improving employment scenario, will lead to a positive turn in consumer spending patterns and improve packaging demand, thereby facilitating Sealed Air's growth.
Sealed Air's share price has shown an upward trend since it reported third-quarter results on Oct 29. Adjusted earnings rose 24% year over year to 52 cents per share and also outpaced the Zacks Consensus Estimate of 46 cents, a positive earnings surprise of 24%.
For 2014, Sealed Air expects net sales to be approximately $7.7 billion, down from the previous guidance of $7.75 billion. The company has factored in an unfavorable impact of 2% from foreign currency translation. However, guidance for adjusted earnings per share has been revised upward to a range of $1.70 to $1.75 from the previously provided guidance of $1.65 to $1.70. Compared with the adjusted earnings per share of $1.39 in 2013, this reflects an increase of 22% to 26%.
Adjusted EBITDA is now projected at $1.11 billion, up from the previously expected range of $1.085 billion to $1.095 billion. For 2014, Sealed Air anticipates capital expenditures of approximately $150 million and cash restructuring payments of approximately $100 million. Free cash flow is expected to be approximately $540 million, up from the previous expectation of $485 million.
Despite anticipated volume declines in the protein market in North America and currency headwinds in the fourth quarter, Sealed Air remains on track to deliver EBITDA growth and margin expansion for the full year 2014. The company will also benefit from cost savings from its ongoing Integration & Optimization Program as well as its recent additional restructuring plan.
Sealed Air's focus on driving value for customers with the right products to meet their sustainability needs will aid growth. The company intends to offer new products with measurable sustainability improvements and quantify their benefits for customers in their specific applications.
Moreover, Sealed Air stands to benefit from the relocation of its headquarters, which will create a stronger, one-company culture and enable greater collaboration, accelerate innovation and drive operating efficiencies.
Further, the estimates for Sealed Air moved upward in the past 60 days. The Zacks Consensus Estimate for 2015 increased about 3% to $2.05 per share in the said timeframe.
Other Stocks to Consider
Other favorably ranked stocks in the same sector include Bemis Company, Inc. (BMS), AptarGroup, Inc. (ATR) and Packaging Corporation of America (PKG). All these stocks carry a Zacks Rank #2 (Buy).
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