Sealed Air Meets Expectations - Analyst Blog

Sealed Air Corporation (SEE) posted third-quarter EPS of 40 cents, in-line the Zacks Consensus Estimate and slightly higher than the prior-year EPS of 39 cents. Through its stringent cost-control measures and global manufacturing strategy, the company managed to offset the impact of lower sales on its earnings.

Net sales declined 1.8% to $1.15 billion from $1.17 billion in the fourth quarter of 2008. This included a negative impact of 3.6% due to lower unit volumes, 2.2% from unfavorable product-price mix and 0.2% due to dispositions, partially offset by a positive contribution of 4.2% from foreign currency translation.

The decline in unit volumes was primarily led by lower equipment sales in the Food Packaging business, while lower prices on select products, primarily in the Protective Packaging segment, had a negative impact on the product-price mix. Excluding the currency exchange effect, net sales were down in all the four segments.

However, Sealed Air posted strong margins during the quarter, reflecting the lower input costs along with the effectiveness of the company's ongoing cost-control efforts. Gross margin increased 280 basis points year over year to 29.1%. Operating margin dropped slightly to 11.6% from 11.7% last year due to higher marketing, administrative and development expenses.

For the full-year 2009, Sealed Air reported earnings of $1.44 per share, in-line with the Zacks Consensus Estimate and up 3% year over year. Net sales declined 12.4% from $4.84 billion in 2008 to $4.24 billion in 2009. The benefits from the company's global manufacturing strategy and cost reduction programs more than offset the impact of lower sales. The company generated free cash flow of $501 million during the year.

For 2010, Sealed Air forecasts EPS in the range of $1.50 to $1.70. This excludes a charge of $0.02 per share related to the remaining portion of the company’s global manufacturing strategy. The company’s guidance assumes sales growth of 4%-6% (on a constant currency basis), operating expenses in the range of 16%-17% of net sales, an incremental $10 million of benefits from the global manufacturing strategy and a full-year effective tax rate of 27.0%. Also, the company projects free cash flow of $300 million for 2010.

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