Pactiv Corporation (PTV) reported earnings per share from continuing operations for the fourth quarter of 2009 of 53 cents, exceeding the Zacks Consensus Estimate of 50 cents.
Revenues declined 3% to $854 million from $883 million in 2008, reflecting 7% volume growth, 11% lower pricing and 1% favorable foreign exchange. The lower pricing reflects normal selling price reductions during the year as raw material costs declined year over year.
In the fourth quarter of 2009, Pactiv changed from using a combination of the last-in, first-out (LIFO) and first-in, first-out (FIFO) inventory accounting methods to the FIFO method. This method provides the most relevant inventory prices and is on the conservative side.
For the Hefty® Consumer Products segment, fourth quarter sales declined 5% to $334 million from $352 million, as 7% favorable volume was offset by 12% lower pricing. The lower pricing reflects normal selling price reductions during the year as raw material costs declined year over year.
For Foodservice/Food Packaging segment, fourth quarter sales of $520 million declined 2% from $531 million in 2008, reflecting 7% volume growth, 10% lower pricing, and 1% favorable foreign exchange. The lower pricing reflects normal selling price reductions during the year as raw material costs declined year over year.
After a pension contribution of $150 million pretax and related favorable cash tax effects of $39 million, free cash flow in the fourth quarter was a use of $63 million compared with a source of $120 million in 2008. The year-over-year decline mainly was a result of reducing inventory in the fourth quarter of 2008.
Cash was $46 million with long-term debt at $1.2 billion and shareholders’ equity at $985 million.
The Company has initiated a first quarter 2010 earnings per share outlook in a range of 38 to 42 cents, and a full year outlook in a range of $2.20 to $2.40. The current Zacks Consensus Estimate stands at 52 cents for the first quarter of 2010 and $2.35 for the full year.
Pactiv Corporation is a leader in the consumer and foodservice/food packaging markets it serves. With 2009 sales of $3.4 billion, Pactiv derives more than 80 percent of its sales from market sectors in which it holds the No. 1 or No. 2 market-share position. Major competitor is Sealed Air Corporation (SEE).
We currently have a Neutral recommendation on PTV.
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