Sealed Air Earnings Lift Packaging and Container Stocks

Sealed Air Corporation (SEE) stock surged 7.73% on Friday, Aug. 2, after the bubble wrap maker posted impressive quarterly results and upped its 2019 guidance. The Charlotte, North Carolina-based company reported adjusted earnings per share (EPS) of 80 cents in the second quarter (Q2), smashing estimates of 64 cents per share, to deliver a 25% earnings surprise.

Management attributes the strong performance to the company's Reinvent SEE strategy, which was introduced in December 2018 to drive growth. Although revenue fell short of Wall Street's expectation by 0.49%, it still grew by $6 million compared to the same quarter last year. "Our second quarter results demonstrate our significant progress in executing our Reinvent SEE strategy," said Ted Doheny, Sealed Air's CEO, per businesswire.com.

The company also wowed investors by lifting its full-year guidance. It now forecasts adjusted EPS of between $2.70 and $2.80 compared with its prior projection of between $2.65 and $2.75, while expecting revenue to come in at $4.85 billion – up from its earlier estimate of $4.8 billion.

A more upbeat 2019 outlook from Sealed Air also helped boost the share price of Packaging Corporation of America (PKG) and Graphic Packaging Holding Company (GPK) – two other industry leaders that have posted mixed quarterly results over the past month amid a more challenging operating environment. Let's take a closer look at all three stocks and discuss several trading plays to consider.

Sealed Air Corporation (SEE)

Sealed Air Corporation provides food safety, security, and product protection solutions globally through two business segments: Food Care and Product Care. The company's food care solutions – such as Cryovac, Darfresh, and OptiDure – target meat packaging, while its product care solutions – which include bubble wrap and Jiffy Mailers – cater to industrial and e-commerce applications. The $6.90 billion packaging giant's better-than-expected quarterly earnings mark the fourth consecutive quarter that the company has surpassed the Street's bottom-line expectations. As of Aug. 5, 2019, Sealed Air pays a 1.56% dividend yield and has returned nearly 30% on the year.

Sealed Air's share price rallied roughly 45% between late December and mid-April. However, since that time, the stock has traded sideways to slightly lower. Earnings-based buying interest returned in Friday's trading session, with the price rallying on above-average volume from a crucial support level at $41. Those who take a trade should anticipate a move to the early 2018 high at $48.72. Implement risk management by placing a stop-loss order beneath yesterday's low at $41.94 and amending it to the breakeven point if the price rises above an area of April consolidation at $47.

Packaging Corporation of America (PKG)

Packaging Corporation of America (PKG) manufactures and sells containerboard and corrugated packaging products primarily in the United States. The 152-year-old company delivered Q2 EPS of $2.04, in line with analysts' expectations. However, the reported figure marks a 2% decline from the year-ago quarter due to higher costs and lower volume in the packaging maker's paper segment. Revenue for the period also lagged estimates, coming in at $1.76 billion, versus a consensus of $1.79 billion. Packaging Corporation of America stock has a market capitalization of $9.57 billion, offers a rewarding 3.16% dividend yield and is up 23.21% year to date (YTD) as of Aug. 5, 2019.

After trending higher for the first two months of 2019, the company's share price has remained stick in a 15-point range. A recent pullback to a two-month trendline provides an entry opportunity for swing traders. Those who take a long position should set a take-profit order in the vicinity of the September 2018 swing high at $115.98 – an area the price may encounter overhead resistance. Protect trading capital by placing a stop somewhere below the 50-day simple moving average (SMA).

Graphic Packaging Holding Company (GPK)

With a market cap of $4.32 billion, Graphic Packaging Holding Company (GPK) provides paper-based packaging solutions for food, beverage, food service, and other consumer products. The company reported Q2 EPS of 24 cents and revenue of $1.55 billion. EPS beat estimates, while revenue missed Wall Street expectations by 0.05%. The figures represent respective top- and bottom-line year-over-year growth of 3% and 33%. Analysts have a 12-month price target on the stock at $16.70 – representing 14% upside from Friday's $14.69 close. As of Aug. 5, 2019, the company's shares issue a 2.02% dividend yield and have jumped nearly 40% YTD, outperforming the packaging and containers industry average by 16.65% over the same period.

Graphic Packaging shares continued grinding higher after 50-day SMA crossed above the 200-day SMA in late April to generate a "golden cross" buy signal. Price broke above the top trendline of an ascending triangle after the company's solid quarterly earnings but has since retraced toward the breakout point at $14.40, which now acts as an area of key support. Traders who buy here should look for a retest of the two-year high at the $16 level. Think about cutting losses if the stock fails to hold above $14.