On Feb 11, Zacks Investment Research upgraded Sealed Air Corporation (SEE) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Shares of Sealed Air attained a 52-week high of $45.79, before closing a notch lower at $45.22 on Feb 11, a day after reporting strong fourth-quarter results and an upbeat 2015 outlook.
The company’s fourth-quarter 2014 adjusted earnings per share of 59 cents increased 51% year over year and also outpaced the Zacks Consensus Estimate of 47 cents, reflecting a positive earnings surprise of 26%.
For 2015, Sealed Air expects net sales to be approximately $7.4 billion. Adjusted earnings per share are currently projected in the range of $2.08 to $2.18, compared with $1.86 earned in 2014, reflecting an increase of 12% to 17%.
The company expects adjusted EBITDA to be in the range of $1.15 billion to $1.18 billion, compared with $1.12 billion in 2014. Sealed Air will continue to stay disciplined on its value-added selling approach and ‘Get Fit and Change the Game’ initiatives, both of which are expected to contribute to margin expansion. Additionally, it expects to generate approximately $600 million in free cash flow in 2015.
For Sealed Air’s new restructuring program, The Fusion Program, consisting of projects across its three divisions and functional support, aggregate cost is projected at approximately $275 million to $285 million, of which the net cash cost is expected to be in the range of $210 million to $220 million. The program is expected to be completed by the end of 2017. Sealed Air estimates annualized savings of approximately $80 million to $85 million by the end of 2018.
The company expects volume growth of around 1.5% in 2015 compared with flat volumes in 2014, led by Diversey Care and Product Care as well as some voulume growth in Food Care. In 2015, lower input costs along with Sealed Air’s continued focus on improving its earnings will help offset the unfavorable currency translation impact. Cheaper oil prices as well as a recovering employment scenario will lead to a positive turn in consumer spending patterns and improve packaging demand, thereby facilitating Sealed Air's growth. The company will also benefit from cost savings from its restructuring programs.
Other Stocks to Consider
Other stocks worth considering in the sector include Berry Plastics Group, Inc. (BERY), Bemis Company, Inc. (BMS) and Sonoco Products Co. (SON). While Berry Plastics sports a Zacks Rank #1 (Strong Buy), Bemis and Sonoco hold a Zacks Rank #2 (Buy).
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