UPDATE: UBS Starts Sealed Air (SEE) at Buy
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(Updated - August 23, 2016 7:52 AM EDT)
UBS initiated coverage on Sealed Air (NYSE: SEE) with a Buy rating and a price target of $54. Analyst Edlain Rodriguez sees company as an industry leader and he highlighted favorable secular and cyclical top-line trends.
"SEE is the leading player in plastics packaging (a premium player to DuPont and Dow), and the closest player to Ecolab in cleaning & sanitizing chemicals. The CEO was a senior executive at Dow for 35 years and since he took office in 2013 SEE has been on a transformative journey. Despite current concerns about the pace of growth (which should accelerate in 2H) and back-end loaded guidance, we believe SEE is well-positioned to grow organic sales 4% and achieve EBITDA margin of 18%+ by 2018 (vs 16.7% in 2015) due to its razor-and-blade business model that results in a high level of recurring consumables," said Rodriguez.
The analyst added, "Factors driving our forecast for top-line growth include significant exposure to an upcoming cyclical recovery in the US beef market, secular growth trends in e-commerce packaging as well as cleaning solutions for increasing health standards. About 15% of total sales is exposed to fresh red meat, which is leveraged to the beef cycle. Nearly 7% of sales is to e-commerce and related third-party logistics (3PLs). With its addressable markets growing at 2-4%, we expect SEE to outpace the market given its #1 or #2 market positions, new product introductions, and history of innovation."
Shares of Sealed Air closed at $46.88 yesterday.
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