SEE - Sealed Air raised to Buy at UBS as inflecting point nears

2023-04-05 11:53:34 ET

Sealed Air ( NYSE: SEE ) +2.1% in Wednesday's trading as UBS upgraded the stock to Buy from Neutral with a $59 price target, believing it now trades at an attractive 10%-20% valuation discount.

"We believe the market is pricing in ~10% lower EBITDA vs. 2023 cons, reflecting ~12% organic Y/Y EBITDA declines and minimal growth into 2024," UBS analyst Joshua Spector wrote.

Sealed Air ( SEE ) delivered 6% higher organic EBITDA Y/Y in 2020 on flattish volumes, while in 2009 EBITDA grew 8% Y/Y as food volumes fell 3%-4% Y/Y, which "reflects some countercyclicality in earnings relative to volumes and provides defensiveness in a downturn," Spector said.

"Supply chain issues, post-COVID demand reset and industrial destocking drove negative volumes over the past year, but we expect volumes to inflect positive starting in Q3 2023, [which] should restore confidence in the SEE growth algorithm, and we model a long-term ~13% EPS CAGR, which makes the stock undeserving of the current valuation discount," according to the analyst.

For FY 2023, Sealed Air ( SEE ) has issued guidance for adjusted earnings of $3.50-$3.80/share on revenues of $5.8B-$6.1B .

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