Sealed Air Earnings: Food Packaging Volume Gains Signal End-Market Recovery; Shares Attractive

Narrow-moat Sealed Air reported second-quarter results that were largely in line with our expectations. Net sales declined roughly 2.5% year over year as growth in food was offset by continued pullbacks in the protective business. That said, consolidated adjusted EBITDA margin expanded 90 basis points from a year ago to 21.2% as the Sealed Air’s cost management initiatives continued to bear fruit in a challenging market. Destocking headwinds have relented, but demand recovery across Sealed Air’s portfolio remains mixed. While demand has recovered well in food-related end markets, the protective business remains pressured amid soft industrial demand. Nevertheless, we expect the food business will buoy consolidated results in the second half of the year despite persistent challenges in the protective business. As such, we maintained our $54 per share fair value estimate.