Sealed Air (SEE) Upgraded to Buy on Strong 2015 Outlook

On Mar 28, Zacks Investment Research upgraded Sealed Air Corporation SEE to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Shares of Sealed Air have been on the rise since the company reported strong fourth-quarter results and provided an upbeat 2015 outlook on Feb 10.

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, an increase of 12% to 17% from $1.86 earned in 2014. 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 anticipates lower raw material costs to favorably impact margins in 2015. Moreover, the company’s continued focus on adding new products, value added selling, operational discipline, and earnings quality improvement efforts will enhance 2015 performance. Additionally, it expects to generate approximately $600 million in free cash flow in 2015. Sealed Air also expects annualized interest expense savings to be approximately $30 million.

Going forward, the company will benefit from its ongoing Earnings Quality Improvement Program (EQIP) which is estimated to generate annualized savings of approximately $90—$110 million by the end of 2016. Sealed Air also estimates annualized savings of approximately $80 million to $85 million by the end of 2018 from its new restructuring program, The Fusion Program, announced in Dec 2014.

Lower gasoline prices, resulting from cheaper oil, will provide a cost tailwind. This, along with an improving employment scenario, will lead to a positive turn in consumer spending patterns. Consequent rise in packaging demand will facilitate Sealed Air’s growth.

Other Stocks to Consider

Other stocks worth considering in the sector include Berry Plastics Group, Inc. BERY, Bemis Company, Inc. BMS and Rock-Tenn Company RKT. While Berry Plastics sports a Zacks Rank #1 (Strong Buy), Bemis and Rock-Tenn hold the same rank as Sealed Air.

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Zacks Investment Research