Sealed Air Corporation SEE is slated to release third-quarter 2017 results on Nov 8, before the opening bell.
In the second quarter, the company’s top-line declined 5.4% on a year-over-year basis despite a 3% rise in the bottom line. Notably, Sealed Air’s earnings lagged estimates while revenues beat in the second quarter.
The company has delivered an average negative earnings surprise of 1.64% in the trailing four quarters. Let’s see how things are shaping up for this announcement.
Sealed Air Corporation Price and EPS Surprise
Sealed Air Corporation Price and EPS Surprise | Sealed Air Corporation Quote
Earnings Whispers
Our proven model does not conclusively show that Sealed Air is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here, as you will see below.
Zacks ESP: Sealed Air’s Earnings ESP is +3.30% as the Most Accurate estimate of 47 cents is pegged higher than the Zacks Consensus Estimate of 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Sealed Air currently carries a Zacks Rank #4 (Sell) which when combined with earnings ESP of +3.30% makes surprise prediction difficult. As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors At Play
Per the Zacks Consensus Estimates, total revenues are expected to inch up 0.03% in the third quarter. The Product Care segment’s revenues are expected to go up 3% year over year to $402 million. However, the Food Care segment’s revenue will decline 14% year over year to $699 million in the to-be-reported quarter.
Per projections, volume growth in the Product Care segment will be 0.03%, much lower than the 6.1% growth witnessed in second-quarter 2017 and 10.1% in the prior-year third quarter. Volume growth in the Food Care segment will be 0.02%, lower than the 2.7% growth witnessed in second-quarter 2017 but nevertheless an improvement from the 0.6% dip in volumes in the prior-year third quarter.
Volumes growth in North America will likely remain strong as a result of continued adoption of our innovative solutions and strong-end market demand across all proteins and within the e-commerce and fulfillment sectors. However, continued economic uncertainty along with social and political instability in Latin America and EMEA will affect volumes in the region.
Though Sealed Air will benefit from the divestment of its Diversey Care division as well as the food hygiene and cleaning business within the Food Care division, it will be substantially dilutive to earnings in the third quarter. Further, costs associated with the Diversey Care operations and various restructuring actions underway will strain margins.
Also, recent resin price increases due to the impact of Hurricane Harvey will dent the quarter’s margins. Though Sealed Air has implemented a price increase recently in Food Care, the benefits of it will take time to translate into improved earnings. Meanwhile, margins will remain affected.
The Zacks Consensus Estimate for earnings is currently pegged at 46 cents, reflecting a 35.92% year-over-year decline.
Share Price Performance
Sealed Air underperformed the industry in the past year. While the stock dipped 3.9%, the industry recorded growth of 16.9%.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Deere & Company DE has an Earnings ESP of +0.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Rockwell Automation Inc. ROK has an Earnings ESP of +1.94% and a Zacks Rank #2.
Zebra Technologies Corporation ZBRA has an Earnings ESP of +1.74% and a Zacks Rank #2.
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