RBC cuts Sealed Air price target to $38, retains rating

On Thursday, RBC Capital Markets adjusted its outlook on Sealed Air Corporation (NYSE:SEE), reducing the price target to $38.00 from the previous $39.00, while maintaining a Sector Perform rating on the stock. The decision comes amid expectations of near-term foreign exchange benefits and price/cost tailwinds due to lower resin costs observed in Q4. These are anticipated to be short-lived as polyethylene prices have seen an increase in Q1, potentially creating a near-term headwind for the company. According to InvestingPro data, five analysts have recently revised their earnings expectations downward for the upcoming period, suggesting broader market concerns about near-term performance.

The analysts at RBC Capital expressed a cautious stance on Sealed Air's near-term prospects. They predict that the favorable conditions resulting from lower input costs will eventually even out. The company is also expected to face challenges such as weak volumes, net negative pricing, and continued high leverage. Despite these challenges, InvestingPro analysis shows the company maintains a GOOD financial health score, with particularly strong profitability metrics and has maintained dividend payments for 19 consecutive years.

In light of these factors, RBC Capital has revised its EBITDA estimates for Sealed Air. The new forecasts for the fourth quarter of 2024, the first quarter of 2025, and the full year of 2025 are now set at $260 million, $264 million, and $1.12 billion respectively. These figures are adjusted down from the previous estimates of $272 million, $276 million, and $1.13 billion.

The revised price target of $38.00 is based on an unchanged valuation multiple of 8.5 times. This adjustment reflects the analyst's view on the company's financial outlook and the challenges it may face in the immediate future. Sealed Air's stock performance will continue to be monitored by investors as these market conditions evolve.

In other recent news, Sealed Air Corporation has disclosed key developments regarding its business operations and financial performance. The packaging industry leader reported mixed results for Q3 2024, with a slight decrease in overall sales and adjusted EBITDA to $1.35 billion and $276 million respectively, while adjusted earnings per share rose by 3% to $0.79. The Food segment sales showed a 1% growth to $898 million, driven by volume growth in protein markets, while the Protective segment's sales declined by 8% to $447 million due to weak industrial demand.

In addition to the earnings announcement, Sealed Air Corporation has undergone significant leadership changes and established new segment verticals. Furthermore, the company has finalized a compensation agreement with former executive Sergio Pupkin, its former Senior Vice President and Chief Growth & Strategy Officer, resulting in the termination of certain performance share units (PSUs).

These recent developments have been recognized by Jefferies, a global investment banking firm, which raised the price target for Sealed Air's shares to $38.00 from the previous target of $35.00, while maintaining a Hold rating on the stock. The company has also increased its free cash flow guidance for 2024 to $400 million, reflecting improved working capital management. These are part of the latest updates from Sealed Air's ongoing business operations.

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