Company Reports

Narrow-moat Sealed Air reported solid first-quarter results as end-market recovery continued. Net sales declined 1.5% year over year as positive growth in the food business was more than offset by weakness in protective. That said, Sealed Air’s cost management initiatives continued to benefit margins, with consolidated operating margin expanding 130 basis points to 13.9%. Sealed Air has navigated a challenging operating environment for much of the past two years as inventory destocking and inflationary headwinds weighed on results. While destocking headwinds are largely behind the company, some activity persists in EMEA, and industrial end markets remain constrained. We maintained our $54 per share fair value estimate.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The company operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of the company's sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Narrow-moat rated SEE reported fourth-quarter results that were largely in line with our expectations as near-term headwinds continued to pressure packaging end markets. Net sales in the fourth quarter declined 2% as contributions from acquisitions were not enough to offset weakness in SEE’s protective business, a trend that persisted for much of 2023. Soft end market demand across much of SEE’s portfolio has weighed on volumes, but positive developments in inventory destocking and consumer spending provide optimism for improvements in 2024. As such, we have maintained our $54 fair value estimate.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The company operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

We see value in Sealed Air shares, which are trading 33% below our $54 fair value estimate. Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. Packaging demand hit its stride in 2021 as pent-up demand for goods and supply chain challenges created robust end-market demand. As a result, the company enjoyed record financial performance in 2021-22. However, this euphoria quickly flipped as supply chain disruptions abated and inventory levels began to build. Many retailers were left with excess inventory and were forced to take inventory-destocking actions, which weighed heavily on the packaging industry. Sealed Air’s management team provided an optimistic outlook when giving its initial full-year 2023 guidance and maintained its guidance through first-quarter earnings despite signs of end-market weakness persisting. While other packaging producers struggled with inventory destocking and changes in consumer spending in 2023, Sealed Air reported underwhelming second-quarter 2023 results and cut full-year adjusted EPS guidance by over 20%, unnerving the market. The company’s shares have fallen over 45% from their March 2022 highs and have vastly underperformed packaging peers during this time.

SEE, formerly Sealed Air, reported solid third quarter results that were largely in line with our expectations. Net sales declined roughly 1% year over year as strength in the company’s food segment was offset by prolonged weakness in its protective business. This was largely driven by inventory destocking and a shift in consumer spending from goods to services, which have weighed on results for much of the year. Management noted sequential improvements in inventory destocking across its portfolio, but we expect near-term headwinds will likely persist through the first half of next year as customers enact stricter inventory management. As such, we have maintained our $54 fair value estimate.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The company operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Narrow-moat-rated Sealed Air reported second-quarter earnings that were slightly below our expectations. The company continues to navigate a challenging operating environment as persistent weakness in its protective business weighs on consolidated results. Net sales fell roughly 3% year over year, largely driven by a double-digit pullback in the protective business amid normalizing demand and inventory destocking in the quarter. While Sealed Air's food packaging business continues to perform well, the company faces a difficult second half of the year amid softening end market demand. As such, we've decreased our fair value estimate to $54 from $55 per share due to reduced near-term revenue and profitability in our forecast.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The firm operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The company operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Sealed Air reported underwhelming first-quarter results as higher selling prices and contributions from the Liquibox acquisition weren't enough to offset an almost double-digit decline in volume. Sales decreased 5% year over year, mainly from weakness in the company’s protective business, despite strength in the food segment. Management reaffirmed its full year adjusted EPS guidance of $3.65 (midpoint) on the expectation of strong performance in the second half of the year. While this seems achievable to us, the company still faces near-term headwinds that could weigh on results. We've decreased our fair value estimate to $55 from $57 per share due to reduced near-term profitability in our forecast.

We are initiating coverage of Sealed Air with a fair value estimate of $57 per share. We assign the firm a narrow moat rating, and we believe the company primarily benefits from switching costs and intangible assets. Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment onsite would find it costly and time consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The company operates 97 manufacturing facilities and serves customers in over 100 countries, with the America’s accounting for roughly two thirds of sales. Sealed Air’s two segments, food and protective, supply customers with both protective packaging materials and the equipment needed to apply it in a manufacturing facility. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

We are dropping coverage of Sealed Air. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

As the world makes headway against the coronavirus pandemic, results have gradually improved for Sealed Air. Fourth-quarter sales rose 3.2% to $1.34 billion, while segment-adjusted EBITDA increased 2.4% to $285 million. Even though this growth was far from break-neck, we view it as respectable, given the challenging economic backdrop. We expect similar improvement in 2021 as the company laps relatively soft results between the first quarter and third quarter. The vaccine rollout should lead to continued economic progress, supporting Sealed Air's performance. We have slightly increased our fair value estimate to $46 per share from $45 due to the time value of money. Our narrow moat rating is unchanged. With shares trading roughly in line with our valuation, we view them as fairly valued at this time.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The food care (65% of sales) and product care (35%) segments make resin-based packaging that protects products as they make their way to end users. This encompasses a wide variety of meat products in food care and industrial and e-commerce shipments in product care. Both segments benefit from a razor-and-blade model. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The food care (65% of sales) and product care (35%) segments make resin-based packaging that protects products as they make their way to end users. This encompasses a wide variety of meat products in food care and industrial and e-commerce shipments in product care. Both segments benefit from a razor-and-blade model. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.

A delicate economic recovery underpinned Sealed Air's decent third-quarter results. Companywide sales rose 1.5% to $1.22 billion because of increased organic volumes and prior acquisitions. Adjusted EBITDA grew a more robust 7.5%, as management's efforts to streamline operations and reduce costs appear to be paying off. As we anticipated, strength in e-commerce, resilience in food packaging, and relatively weak industrial production sum up the quarter. With our outlook largely intact, we've modestly increased our fair value estimate to $45 per share from $43 due to the time value of money effects. Our narrow-moat rating is intact.

Sealed Air produces a wide variety of flexible resin packaging, protective shipping materials, and integrated packaging systems. The food care (65% of sales) and product care (35%) segments make resin-based packaging that protects products as they make their way to end users. This encompasses a wide variety of meat products in food care and industrial and e-commerce shipments in product care. Both segments benefit from a razor-and-blade model. Customers with Sealed Air equipment on-site would find it costly and time-consuming to switch from Sealed Air consumables. As a result, Sealed Air enjoys more pricing power on consumables than its more traditional peers.