Sealed Air Corporation (SEE)

A Tale of Two Segments

We have been observing Sealed Air Corporation, with a view to including them on the Helix Transition Index. The below analysis is based on our review of earnings calls, annual reports, and financial statements.

Sealed Air Corporation presents a compelling investment case marked by stark contrasts. The Food segment (67% of revenue) shows remarkable resilience with 1% sales growth and 6% EBITDA improvement. Meanwhile, the Protective segment struggles with 8% sales decline and 21% EBITDA drop

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Net earnings jumped 54% to $88.7M despite a 2.7% revenue decline to $1.35B. Free cash flow stands strong at $484M year-to-date. Management targets $90M in cost savings through efficiency programs.

Three key factors drive our BUY rating:

First, the Food segment's market leadership remains solid. Strong end-market demand and consistent performance offset broader market challenges.

Second, valuation looks attractive. The stock trades below industry averages on EV/EBITDA metrics, creating potential upside as management executes its turnaround strategy.

Third, new CEO Patrick Kivits brings commercial expertise and has launched promising cost optimization initiatives.

However, investors should watch for risks. The $4.5B debt load needs attention, with a 3.7x leverage ratio. The Protective segment requires significant restructuring to reverse its decline. ESG reporting lags industry standards.

Bottom line

Sealed Air offers value at current prices, but success hinges on management's execution across multiple fronts. The Food segment provides stable foundation while investors wait for Protective segment improvements and debt reduction.

Keep watch on quarterly metrics: Protective segment revenue trends, debt reduction progress, and cost savings realization will signal whether management can deliver on its promises.

This analysis is based on data as of January 13, 2025. Always conduct your own research before making investment decisions.