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Why Is Sealed Air (SEE) Down 1.9% Since Last Earnings Report?

·4-min read

A month has gone by since the last earnings report for Sealed Air (SEE). Shares have lost about 1.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sealed Air due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sealed Air Beats on Q3 Earnings & Sales, Raises '21 View

Sealed Air reported third-quarter 2021 adjusted EPS of 86 cents, beating the Zacks Consensus Estimate of 82 cents. The bottom line improved 4.8%, year over year.

Including special items, the company delivered EPS of 71 cents compared with the prior-year quarter’s 85 cents.

Total revenues were up 14% year over year to $1,407 million in the reported quarter. The top line also beat the Zacks Consensus Estimate of $1,383 million.

Cost and Margins

Cost of sales climbed 20.4% year over year to $1,003 million. The gross profit came in at $404 million compared with the year-ago quarter’s $405 million. The gross margin contracted to 28.7% from the prior-year quarter’s 32.6%.

The SG&A expenses declined 4.5% to $190 million, year over year. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $271 million in the quarter, up 4% from the prior-year period. The adjusted EBITDA margin was 19.2% compared with the prior-year quarter’s 21%. The EBITDA margin was impacted by rising material and freight costs, partly offset by lower employee-related expenses and benefits related to an indirect tax recovery in Brazil.

Segment Performance

Food: Net sales jumped 13%, year over year, to $797 million. The company witnessed strong demand for automation and improvement in food service. The adjusted EBITDA was up 11%, year over year, to $169 million. Volume growth and productivity improvements were offset by negative price/cost related to higher input costs.

Protective: The segment reported net sales of $609 million during the quarter under review, up 14% from the prior-year period on continued demand in the automation and industrial markets. The adjusted EBITDA decreased 5.5% year over year to $103 million.

Financial Updates

Cash flow from operating activities was $378 million in the nine-month period ended on Sep 30, 2021 compared with the year-ago period’s $410 million.

The company paid cash dividends of $86 million during the first nine months of 2021 and repurchased shares worth $329 million.

As of Sep 30, 2021, Sealed Air’s net debt was $3.4 billion, up from $3.2 billion as of Dec 31, 2020. As of the end of the quarter, the company had $1.5 billion of liquidity available, which comprised $394 million in cash and $1.14 billion of undrawn, committed credit facilities.

2021 Guidance Updated

For 2021, Sealed Air expects net sales of $5.5 billion, indicating an increase of 12% as reported and 11% in constant dollars. Management projected net sales between $5.4 billion and $5.5 billion in its prior guidance. The company now expects adjusted EBITDA to lie between $1.12 billion and $1.14 billion for the current year. The adjusted EPS are now anticipated in the band of $3.50 to $3.60. The company had earlier provided a guidance range of $3.45-$3.60. Sealed Air projects free cash flow to be between $520 million and $540 million for the ongoing year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Sealed Air has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Sealed Air has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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