Historically, the packaging industry’s growth and profitability have hinged on global economic growth and volumetric trends in specific end-markets, observes growth stock expert Peter Staas, editor of Capitalist Times.

An expanding middle class and rising disposable incomes in emerging markets remain important long-term growth drivers for packaging demand.

These dynamics will never disappear, but many of the industry’s best players have taken an increasingly proactive approach to designing solutions that help to alleviate their customers’ most pressing challenges.

Over the past year, companies specializing in containerboard or corrugated boxes have outperformed, as investors seek leveraged exposure to the growing penetration of e-commerce.

Our top pick in the packaging industry, Sealed Air Corp. (SEE), offers exposure to several upside catalysts that should enable the company to hit its long-term targets of 3 to 5 percent annual revenue growth, accompanied by 6 to 8 percent increases in operating income.

In the near term, the $3.2 billion sale of Diversey Care division and the food hygiene and cleaning business will eliminate a lower-margin business that was outside the packaging outfit’s core competency.

Over the long term, Sealed Air’s food care business will benefit from increasing protein demand as household incomes rise in emerging markets. But the near and intermediate terms also look promising.

The firm’s flexible plastic packaging for food products and offers leveraged exposure to an expected increase in US and European meat volumes over the next few years, as the herds in these markets have grown significantly.

Revenue and profit margins should also receive a boost over the next few years from the ongoing rollout of Sealed Air’s innovative DARFRESH vacuum-packing solution which creates a hermetic seal, and extends the shelf life of meat and prepared foods.

The machine that applies the DARFRESH vacuum-skin to the tray and product can also package 120 units in a minute, improving efficiency.

This approach also reduces freight cost. Consumers also prefer the longer expiration dates because these packages are freezer-ready.

Although Sealed Air is perhaps best known for creating bubble wrap, the company has moved beyond this legacy product to introduce packing solutions for industrial customers that limit dust accumulation and reduce warehouse storage space.

The company has also rolled out solutions targeting the e-commerce industry that reduce the amount of extra space in boxes and the need for additional packing to fill the void. These solutions help to reduce freight costs and damage in transit. Sealed Air has installed more than 850 of these systems.

Finally, we also like the cultural and organization changes that management has made over the past five years, an effort that should foster innovation and partnerships with customers.

Sealed Air rates a buy up to $48 per share for patient investors, though you may want to ease into this position to take advantage of any summer swoon in the stock market.

Peter Staas is managing editor of the Capitalist Times and Energy & Income Advisor.

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