The packaging sector demonstrated impressive robustness despite enduring geopolitical turmoil and high interest rates. The sector is primed for considerable growth, fueled by a resounding upswing in global economic endeavors and rapid industrialization.
Given this backdrop, investors could consider buying undervalued packaging stocks Sealed Air Corporation (SEE) and Sonoco Products Company (SON) today.
The rise of e-commerce and the shift toward online shopping has led to a surge in demand for packaging materials to safely transport products to consumers. This has created a need for innovative and sustainable packaging solutions to meet the diverse needs of the market.
Additionally, the growing emphasis on sustainability and environmental consciousness has pushed the industry to develop eco-friendly packaging options. Consumers are increasingly looking for products packaged in recyclable, biodegradable, or reusable materials, driving the industry to adopt more sustainable practices.
Moreover, the packaging industry plays a critical role in ensuring the safety and security of products during transportation and storage. With the globalization of supply chains, businesses are relying on robust packaging solutions to protect goods as they travel across long distances and through various modes of transport. The industrial packaging market is estimated to reach $93.45 billion by 2029, growing at a 7.1% CAGR.
Considering these factors, let’s examine the fundamentals of the Industrial - Packaging stock picks, starting with the second in line.
Stock #2: Sealed Air Corporation (SEE)
SEE provides packaging solutions in the Americas, Europe, the Middle East, Africa, Asia, Australia, and New Zealand. It operates through two segments: Food and Protective.
On April 24, 2024, SEE and Ossid launched a new global partnership to provide case-ready processors, a total solution for their tray overwrapping machinery and material needs. The combination of equipment, materials, and services from SEE and Ossid allowed customers to achieve operational efficiency and sustainability goals and objectives for fresh protein producers.
In terms of forward non-GAAP P/E, SEE is trading at 11.69x, 22.2% lower than the industry average of 15.03x. The stock’s forward EV/EBIT of 11.17x is 11.4% lower than the industry average of 12.61x.
SEE’s net sales for the fiscal first quarter that ended March 31, 2024, amounted to $1.33 billion. Its adjusted EBITDA stood at $278.30 million, up 4.1% from the prior year’s quarter. In addition, its adjusted net earnings rose 5.5% from the year-ago quarter to $112.80 million. Also, its adjusted EPS grew 5.4% year-over-year to $0.78.
Analysts expect SEE’s revenue for the quarter ending December 31, 2024, to increase 1.1% year-over-year to $1.39 billion. Its fiscal 2025 EPS is expected to rise 11.6% year-over-year to $3.26. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past nine months, the stock has gained 3.8%, closing the last trading session at $34.12.
SEE’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
SEE has a B grade for Quality. It is ranked #6 out of 21 stocks in the A-rated Industrial - Packaging industry. Click here to see SEE’s Growth, Value, Momentum, Stability, and Sentiment ratings.
Stock #1: Sonoco Products Company (SON)
SON designs, develops, manufactures, and sells various engineered and sustainable packaging products in North and South America, Europe, Australia, and Asia. The company operates through the Consumer Packaging and Industrial Paper Packaging segments.
On June 24, 2024, SON entered into an agreement with KPS Capital Partners, LP, to acquire Eviosys for $3.90 billion. SON has the option to pay up to $200 million of the purchase consideration in the form of Sonoco stock. The transaction is expected to close by the end of 2024.
On June 17, 2024, SON announced that it would raise the price for all converted paperboard products by a minimum of 6%, effective with shipments in the United States and Canada, on or after July 10, 2024. This includes tubes, cores, cones, and protective packaging.
In terms of forward EV/EBITDA, SON is trading at 7.68x, 7.5% lower than the industry average of 8.30x. The stock’s forward EV/Sales of 1.21x is 27.4% lower than the industry average of 1.67x.
For the first quarter that ended March 31, 2024, SON’s net sales and adjusted operating profit stood at $1.64 billion and $176 million, respectively. For the same quarter, its adjusted net income attributable to SON and EPS amounted to $111.49 million and $1.12, respectively.
Street expects SON’s EPS for the quarter ending September 30, 2024, to increase 1.8% year-over-year to $1.49. Its revenue for the quarter that ended June 30, 2024, is expected to rise marginally year-over-year to $1.71 billion. SON has declined 7.4% over the past nine months, closing the last trading session at $50.31.
SON’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, equating to Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. It is ranked #4 in the same industry. Get SON’s Growth, Momentum, and Sentiment ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SEE shares were trading at $34.11 per share on Tuesday afternoon, down $0.01 (-0.03%). Year-to-date, SEE has declined -5.57%, versus a 15.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
2 Undervalued Packaging Stocks Worth Buying Today StockNews.com
