Sealed Air Attains New 52-Week High - Analyst Blog

Shares of Sealed Air Corporation (SEE) hit a new 52-week high of $34.13 during mid-day trading on Dec 27. The company has delivered a robust one-year return of about 98.6% and year-to-date return of 97%, outperforming the S&P 500.

The Elmwood Park, NJ-based specialty packaging service provider has long-term estimated earnings per share growth rate of 11.7%. Average volume of shares traded over the last three months is approximately 1.57 billion.

What’s Driving Sealed Air Upward?

The announcement on Dec 24 that W.R. Grace & Co. (GRA) is emerging from a bankruptcy after 12 years has been a catalyst for Sealed Air. Maryland-based W.R. Grace had filed for bankruptcy in 2001 under a wave of asbestos-related lawsuits. This development will boost Sealed Air shares as it finalizes any asbestos litigation and will result in a tax benefit. Furthermore, this will be accretive to the company's earnings next year.

Sealed Air’s share prices had also escalated following its third quarter results on Oct 30. Sealed Air’s third-quarter adjusted net earnings improved 39% year over year to 39 cents, helped by higher volumes and a positive price/mix. The results beat the Zacks Consensus Estimate of 34 cents per share.

In fact, the company has outpaced the consensus estimate in three out of four times, missing it on one occasion. Thus, the average surprise over the last four quarters is 16.6%.

Sealed Air raised its guidance for fiscal 2013 adjusted earnings per share to the range $1.25 to $1.30 from $1.10 to $1.20. Net sales guidance was changed to $7.7 billion as against prior range of $7.7 to $7.9 billion.

Sealed Air’s Integration & Optimization Program will generate cost savings and benefits of approximately $195 million to $200 million by the end of 2014. The company is expected to realize $90 million of benefits in 2013, of which approximately $71 million has been realized in the first three quarters of 2013. Sealed Air has also announced an additional restructuring plan with projected annualized savings of $80 million by 2015.

Sealed Air will benefit from its 4-9% price increase, which was effective from Nov 1, for most products in its Food Care and Product Care divisions in North America. The price hike is in response to rising polyethylene costs and it may boost the 2014 results if successful.

Sealed Air has agreed to sell its rigid medical packaging business to Milwaukee-based private equity firm Mason Wells for $125 million, as it is no longer considered to be a strategic fit for the company. The proceeds are likely to be utilized to pay back debt and thus reduce interest expense, and thereby contributing to margins.

Other Stocks to Consider

Sealed Air currently retains a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the sector include Packaging Corporation of America (PKG) and Ball Corporation (BLL). While Packaging Corporation holds a Zacks Rank #1 (Strong Buy), Ball Corporation carries a Zacks Rank #2 (Buy).

BALL CORP (BLL): Free Stock Analysis Report

GRACE (WR) NEW (GRA): Free Stock Analysis Report

PACKAGING CORP (PKG): Free Stock Analysis Report

SEALED AIR CORP (SEE): Free Stock Analysis Report

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