Sealed Air's Strategic Turnaround: Is the Protective Segment Poised for Recovery?

Sealed Air Corporation's Protective Packaging segment has long been a mixed bag for investors. In 2025, the segment's performance reflects a delicate balancing act between volume headwinds and operational discipline. With net sales declining 9% in Q1 and 3% in Q2, the segment faces persistent challenges in North America, where fulfillment and industrial portfolios have struggled. Yet, beneath the surface, Sealed Air's CTO2Grow Program and strategic focus on margin resilience are creating a foundation for a potential turnaround.

Volume Headwinds and Pricing Pressures

The Protective segment's struggles are rooted in macroeconomic and structural factors. In Q2 2025, North American fulfillment volumes dipped 2% year-over-year, a lingering effect of customer churn and shifting e-commerce dynamics. Meanwhile, pricing pressures—driven by competitive markets and customer demands for cost reductions—cut another 2% from sales. These headwinds are compounded by global trade policy shifts, which have disrupted supply chains and reduced demand for industrial packaging in key markets.

However, the industrial portfolio's recent inflection offers a glimmer of hope. For the first time in over three years, the segment reported volume growth in Q2, marking a critical turning point. This growth, though modest, suggests that Sealed Air's customer-centric strategies and tailored solutions are beginning to resonate in industrial markets.

Cost Optimization and Margin Resilience

Sealed Air's CTO2Grow Program has emerged as a lifeline for the Protective segment. By slashing operating costs and improving productivity, the initiative has partially offset the drag from volume declines. In Q2, the program contributed to a 17.8% EBITDA margin, down only 50 basis points from the prior year despite weaker volumes. This margin resilience is remarkable given the context: the Food segment, which benefits from the same cost discipline, saw its EBITDA rise 3% year-over-year.

The program's impact extends beyond cost savings. It has enabled Sealed Air to reinvest in high-growth areas, such as industrial packaging, while maintaining financial flexibility. As of June 2025, the company reported $1.2 billion in liquidity, including $354 million in cash and $830 million in unused credit lines. This liquidity buffer provides a safety net as the company navigates macroeconomic volatility.

Industrial Growth: A Sustainable Path Forward?

The industrial portfolio's turnaround is a key test of Sealed Air's strategic vision. While Q2's volume growth is encouraging, investors must assess whether this trend is sustainable. The company attributes the inflection to improved customer engagement and tailored solutions for industrial clients, such as custom foam inserts and modular packaging systems. These innovations align with broader industry trends toward sustainability and supply chain efficiency.

Yet, the road ahead remains bumpy. North America's industrial markets are still grappling with inflationary pressures and shifting consumer behavior. Sealed Air's ability to maintain pricing discipline while expanding its industrial footprint will determine whether this growth translates into long-term margin expansion.

Peer Comparison and Investment Implications

To evaluate Sealed Air's trajectory, consider its peers in the packaging sector. While companies like Amcor and WestRock have also faced volume declines, Sealed Air's margin resilience stands out. Its EBITDA margin of 17.8% in Q2 outperformed the sector average of 15.2%, a testament to the CTO2Grow Program's effectiveness.

However, Sealed Air's stock valuation remains cautious. At a forward P/E of 12x and a P/EBITDA of 8x, the company trades at a discount to peers like Amcor (14x P/E, 10x P/EBITDA). This discount reflects lingering concerns about the Protective segment's recovery but also creates a margin of safety for investors who believe in the company's turnaround.

Final Verdict: A Calculated Bet

Sealed Air's Protective segment is not a slam dunk for investors, but it is on a path to recovery. The CTO2Grow Program has stabilized margins, and the industrial portfolio's growth suggests that the company's operational transformation is taking hold. However, macroeconomic risks—particularly in North America—remain a wildcard.

For investors, the key is to balance optimism with caution. Sealed Air's disciplined cost management and liquidity position make it a compelling candidate for a long-term hold, especially if the industrial portfolio continues to gain traction. That said, short-term volatility is likely, and patience will be rewarded.

In conclusion, Sealed Air's strategic turnaround is a work in progress. While the Protective segment's recovery is not guaranteed, the company's focus on margin resilience and industrial growth provides a plausible path to outperforming its peers. For those willing to navigate the near-term noise, Sealed Air offers a unique opportunity in the packaging sector.