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SunTrust Rates Sealed Air Corporation as a ‘Buy’

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Price movement

Sealed Air (SEE) has a market cap of $9.3 billion. It rose by 1.2% to close at $48.37 per share on July 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 5.6%, 2.3%, and 9.1%, respectively, on the same day. SEE is trading 4.4% above its 20-day moving average, 3.8% above its 50-day moving average, and 5.7% above its 200-day moving average.

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Related ETFs and peers

The Materials Select Sector SPDR ETF (XLB) invests 1.8% of its holdings in Sealed Air. The ETF tracks a market-cap-weighted index of US basic materials companies. The fund includes only the materials components of the S&P 500. The YTD price movement of XLB was 11.9% on July 13.

The iShares Russell 3000 ETF (IWV) invests 0.04% of its holdings in Sealed Air. The ETF tracks a cap-weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps.

The market caps of Sealed Air’s competitors are as follows:

  • Bemis Company (BMS): $5.0 billion
  • AptarGroup (ATR): $5.0 billion
  • Sonoco Products (SON): $5.1 billion

Sealed Air’s rating

SunTrust Robinson Humphrey has initiated the coverage of Sealed Air with a “buy” rating and set the stock price target at $54 per share.

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Sealed Air’s performance in fiscal 1Q16

Sealed Air (SEE) reported fiscal 1Q16 net sales of $1.6 billion, a fall of 8.9% from its net sales of $1.7 billion in fiscal 1Q15. In fiscal 1Q16, SEE reported a stock appreciation rights expense and foreign exchange income related to Venezuelan subsidiaries of $0.3 million and -$1.7 million, respectively, compared with $2.9 million and $0.8 million in fiscal 1Q15.

Net income and earnings

SEE’s net income fell to $91.9 million in fiscal 1Q16, compared with $97.2 million in fiscal 1Q15. It reported EPS (earnings per share) of $0.46 in fiscals 1Q15 and 1Q16.

Sealed Air’s cash and cash equivalents fell by 11.9% and its inventories rose by 11.5% between fiscals 4Q15 and 1Q16. Its current ratio and debt-to-equity ratio fell to 1.2x and 12.4x, respectively, in fiscal 1Q16, compared with 1.23x and 13.0x in fiscal 4Q15.

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Quarterly dividend

Sealed Air has declared a quarterly cash dividend of $0.16 per share on its common stock. The dividend will be paid on September 16, 2016, to shareholders on record at the close of business on September 2, 2016.

Projections

The company has affirmed the following projections for fiscal 2016:

  • net sales of ~$6.8 billion
  • adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in the range of $1.17–$1.19
  • adjusted EPS in the range of $2.52–$2.60, excluding the impact of special items
  • adjusted tax rate of 24%
  • free cash flow of ~$550 million, which includes capital expenditures of ~$275 million and cash restructuring payments of ~$110 million

In the next part of this series, we’ll discuss WhiteWave Foods. 

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