Integrated packaging solutions provider Sealed Air Corporation (NYSE:SEE) reported Q4 CY2024 results beating Wall Street’s revenue expectations, but sales were flat year on year at $1.37 billion. On the other hand, the company’s full-year revenue guidance of $5.3 billion at the midpoint came in 1.9% below analysts’ estimates. Its non-GAAP profit of $0.75 per share was 11.3% above analysts’ consensus estimates.
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Sealed Air (SEE) Q4 CY2024 Highlights:
- Revenue: $1.37 billion vs analyst estimates of $1.36 billion (flat year on year, 1.3% beat)
- Adjusted EPS: $0.75 vs analyst estimates of $0.67 (11.3% beat)
- Adjusted EBITDA: $271 million vs analyst estimates of $262.5 million (19.7% margin, 3.2% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $5.3 billion at the midpoint, missing analyst estimates by 1.9% and implying -1.7% growth (vs -1.8% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $3.10 at the midpoint, missing analyst estimates by 0.8%
- EBITDA guidance for the upcoming financial year 2025 is $1.13 billion at the midpoint, in line with analyst expectations
- Operating Margin: 11.6%, down from 15.3% in the same quarter last year
- Free Cash Flow Margin: 13.5%, down from 19.2% in the same quarter last year
- Sales Volumes rose 1% year on year (-3.9% in the same quarter last year)
- Market Capitalization: $4.68 billion
"During the fourth quarter, we completed the reorganization into two market-focused businesses, Food and Protective, and had a strong finish to the year," said Dustin Semach, Sealed Air's President and CEO.
Company Overview
Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.
Industrial Packaging
Industrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Sealed Air’s 2.4% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Sealed Air’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.2% annually. Sealed Air isn’t alone in its struggles as the Industrial Packaging industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
We can better understand the company’s revenue dynamics by analyzing its number of units sold. Over the last two years, Sealed Air’s units sold averaged 3.1% year-on-year declines. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent. 
This quarter, Sealed Air’s $1.37 billion of revenue was flat year on year but beat Wall Street’s estimates by 1.3%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Sealed Air has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.3%.
Analyzing the trend in its profitability, Sealed Air’s operating margin decreased by 2.4 percentage points over the last five years. Many Industrial Packaging companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope Sealed Air can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.
In Q4, Sealed Air generated an operating profit margin of 11.6%, down 3.7 percentage points year on year. Since Sealed Air’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sealed Air’s weak 2.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
Sealed Air’s two-year annual EPS declines of 12.3% were bad and lower than its two-year revenue performance.
In Q4, Sealed Air reported EPS at $0.75, down from $0.88 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Sealed Air’s full-year EPS of $3.15 to stay about the same.
Key Takeaways from Sealed Air’s Q4 Results
It was encouraging to see Sealed Air beat analysts’ EPS expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, both its full-year revenue and EPS guidance missed, which is weighing on shares. The stock traded down 1.6% to $31.60 immediately after reporting.
Is Sealed Air an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.