Sealed Air (SEE) is positioned to grow as emerging markets begin to demand more of its packaging materials, particularly as it relates to increased consumption of processed and grocery-style foods, according to the company. Analysts, however, see tougher times in the world in the near term, which could provide a good entry point into the stock.
Sealed Air makes packaging materials for industries as varied as food and beverage processing, food service, retail, and healthcare and for industrial, commercial and consumer applications.
Among its products are brands such as Bubble Wrap brand cushioning and Cryovac food-packaging solutions. In addition, in 2011 the company acquired Diversey Holdings, a maker of cleaning and hygiene solutions. In 2011, it sold products in 175 countries through operations in 62 countries.
In addition to M&A, Sealed Air expects to add growth via the emerging markets. In 2011, approximately 59 percent of its revenue came from outside the United States, including approximately 18 percent from developing regions such as Africa, Asia excluding Japan and South Korea, Central and Eastern Europe, and Latin America.
“We anticipate that on a full-year basis, as a result of the acquisition of Diversey, our operations will generate approximately 70 percent of our revenue from outside the United States, including approximately 20 percent of our revenue from developing regions,” management said in a recent filing.
“We are focused on realizing growth from developing regions due to favorable demand trends, including: greater disposable income from a growing middle class; the continued urbanization of populations; increased wealth per capita driving greater demand for protein and higher quality foods; and expansion of cold supply chains and Western-style retail supermarkets, which require more packaging,” management said.
Sealed Air has a market cap of $3.45 billion in a sector, containers and packaging, where the average company size is less than $1 billion. Its trailing 12-month P/E ratio is 36.33 and its five-year projected price-to-earnings-growth (PEG) ratio is 4.29, compared to 2.13 for the sector.
Its projected earnings per share growth for the coming year is 26.39 percent, compared to a sector average of 19.51 percent.
Analysts are largely neutral on Sealed Air. Merrill Lynch and Jefferies have buy ratings on the shares, and Standard & Poor’s rates SEE at outperform.
“We see price hikes and sequential volume improvement, while increased cost synergies aid EBITDA margins. However, we also see global uncertainty near-term,” S&P analysts wrote in early May, cutting the 12-month target price to $22.
Sealed Air next reports on Aug. 2.
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