Sealed Air (SEE)

Integrated packaging solutions provider Sealed Air Corporation (NYSE:SEE) announced better-than-expected revenue in Q3 CY2025, but sales were flat year on year at $1.35 billion. The company expects the full year’s revenue to be around $5.3 billion, close to analysts’ estimates. Its non-GAAP profit of $0.87 per share was 24.9% above analysts’ consensus estimates.

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 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.

Competitors in the packaging industry include Crown Holdings (NYSE:CCK), Ardagh Group (NYSE:ARD), and Silgan Holdings (NASDAQ:SLGN)

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Sealed Air’s sales grew at a sluggish 1.9% compounded annual growth rate over the last five years. This was below our standards and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Sealed Air’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.7% annually.

This quarter, Sealed Air’s $1.35 billion of revenue was flat year on year but beat Wall Street’s estimates by 2.7%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Sealed Air’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 30.5% gross margin over the last five years. Said differently, Sealed Air paid its suppliers $69.50 for every $100 in revenue.

Sealed Air produced a 29.6% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

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 15.1%.

Analyzing the trend in its profitability, Sealed Air’s operating margin decreased by 1.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Sealed Air generated an operating margin profit margin of 13.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sealed Air’s weak 1.4% 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.

Although it wasn’t great, Sealed Air’s flat two-year EPS topped its two-year revenue performance.

Diving into the nuances of Sealed Air’s earnings can give us a better understanding of its performance. While we mentioned earlier that Sealed Air’s operating margin was flat this quarter, a two-year view shows its margin has expanded. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Sealed Air reported adjusted EPS of $0.87, up from $0.79 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Sealed Air’s full-year EPS of $3.32 to shrink by 4.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Sealed Air has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.7% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Sealed Air’s margin dropped by 1.9 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Sealed Air’s free cash flow clocked in at $120.1 million in Q3, equivalent to a 8.9% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Sealed Air hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 16.7%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Sealed Air’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Sealed Air reported $282.5 million of cash and $4.27 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.13 billion of EBITDA over the last 12 months, we view Sealed Air’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $226.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Sealed Air beat analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 1.1% to $33.62 immediately following the results.

Updated: December 3, 2025 at 10:36 PM EST

Before deciding whether to buy Sealed Air or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies making their customers lives easier, but in the case of Sealed Air, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its strong operating margins show it’s a well-run business, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Sealed Air’s P/E ratio based on the next 12 months is 13.3x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $45.13 on the company (compared to the current share price of $42.47).