The Zacks Analyst Blog Highlights: Sealed Air, Silgan Holdings, Berry Plastics Group and Bemis

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Dec 24, 2014, 09:39 ET

CHICAGO, Dec. 24, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Sealed Air Corporation (NYSE:SEE-Free Report), Silgan Holdings Inc (Nasdaq:SLGN-Free Report), Berry Plastics Group, Inc. (NYSE:BERY-Free Report) and Bemis Company, Inc. (NYSE:BMS-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Packaging Stocks Continue Climbing on Falling Oil Prices

While falling oil prices might be a cause of distress for many industries, it certainly means a Merry Christmas for packaging stocks. Falling oil prices not only provide packaging companies with a cost tailwind but also boost demand due to the increasing disposable income at the customer level.

The macroeconomic environment has been challenging for the packaging industry in the past few years due to weak consumer spending. Moreover, economic uncertainty in the Eurozone and raw material and energy price inflation also had a negative impact on packaging producers.

Since June, the price of crude oil has plunged more than 40% from over $100 a barrel to under $60. Cheaper oil means lower gasoline prices. Given that energy represents 20% of costs for low-income families, the savings will result in increased consumer spending. This, along with an improving employment scenario, will provide a much-needed boost to packaging demand.

Oil constitutes a large part of the input cost utilized to produce the materials used in the Packaging industry. Lower oil prices would lower the transportation costs for the industry. Resin, a derivative of oil, makes up almost a major portion of the cost of goods sold of the packaging companies.

Polypropylene and polyethylene account for the majority of their plastic resin purchases. Plastic resins are subject to price fluctuations, including those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which resins are produced.

The correlation between polyethylene prices to crude oil is 95%. Polyethylene prices fell 3 cents per pound in November and are expected to fall 4 cents to 5 cents per pound in December. Generally, a $10 per barrel decline in oil translates to 4 cents per pound decline in polyethylene prices. This will lead to meaningful margin expansion for packaging companies.

In line with this, we are highlighting a few stocks in the packaging industry which have been on the rise and achieved their respective 52-week highs given expectations of significant savings on raw-material costs and prospects of increase in volume due to falling oil prices.

Sealed Air Corporation (NYSE:SEE-Free Report)

Elmwood Park, NJ-based Sealed Air is a major specialty packaging service provider to a diverse set of end markets. The company operates in the United States and in 50 other countries with packaging and performance-based materials and equipment systems serving food, medical, and an array of industrial and consumer applications. Sealed Air has a market cap of $8.98 billion and a long-term estimated growth rate of 12.2%.

Shares of Sealed Air reached a new 52-week high of $42.90 on Dec 19. The company has delivered a solid one-year return of about 32.6% and a year-to-date return of 26.8%, outperforming the S&P 500. Average volume of shares traded over the last three months is approximately 2523K. Sealed Air sports a Zacks Rank #1 (Strong Buy).

Silgan Holdings Inc (Nasdaq:SLGN-Free Report)

Stamford, CT-based Silgan is a leading manufacturer of consumer goods packaging products, operating 81 manufacturing facilities across the Americas, Europe and Asia. In North America, Silgan is the largest supplier of metal containers for food products and a major supplier of plastic containers for personal care products. Silgan has a market cap of $3.4 billion with a long-term estimated growth rate of 10.4%.

Shares of Silgan reached a new 52-week high of $54.56 on Dec 19. The company has delivered a one-year return of about 17.3% and a year-to-date return of 14.4%. Average volume of shares traded over the last three months is approximately 209K. Silgan currently carries a Zacks Rank #2 (Buy).

Berry Plastics Group, Inc. (NYSE:BERY-Free Report)

Evansville, IN-based Berry Plastics is a manufacturer and distributor of plastic consumer packaging and engineered materials in North America and internationally with a market cap of $3.6 billion. Berry Plastics Group is reportedly one of the largest global purchasers of plastic resins, more than 2 billion pounds annually. Berry Plastics has long-term estimated earnings per share growth rate of 15.3%.

Shares of Berry Plastics reached a new 52-week high of $31.17 on Dec 19. The company has delivered a solid one-year return of about 35.2% and a year-to-date return of 29.9%, outperforming the S&P 500. Average volume of shares traded over the last three months is approximately 1297K. Berry Plastics is a Zacks Rank #3 (Hold) stock.

Bemis Company, Inc. (NYSE:BMS-Free Report)

Neenah, WI-based Bemis Company manufactures and sells packaging products and pressure sensitive materials in North America, Latin America, Europe and Asia-Pacific with a market cap of $4.5 billion. Bemis has long-term estimated earnings per share growth rate of 6.3%.

Shares of Bemis Company reached a new 52-week high of $47.20 on Dec 22. The company has delivered a one-year return of about 17.3%, outperforming the S&P 500. Average volume of shares traded over the last three months is approximately 1469K. Bemis holds a Zacks Rank #3.

Conclusion

The EIA expects global oil inventories to continue to build over the next year, exerting downward pressure on oil prices. EIA projects that Brent prices will reach a 2015 monthly average low of $63 per barrel for each month, from March through May, and then increase through the rest of the year to average $73 per barrel during the fourth quarter.

The time is thus ripe to invest in the packaging industry, where revenue and earnings are expected to increase due to rise in volume and lower costs.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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