Sealed Air Attains New 52-Week High - Analyst Blog
December 30 2013 - 8:05AM
Zacks
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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