On Wednesday, RBC Capital adjusted its outlook on Pactiv Evergreen (NASDAQ: PTVE), reducing the price target from $15.00 to $13.00, while maintaining an Outperform rating on the stock. The adjustment follows Pactiv Evergreen's recent quarterly results and a downward revision in its 2024 earnings guidance.
The company experienced a notable sell-off, exceeding 20%, which the analyst at RBC Capital views as an excessive response to Pactiv Evergreen's second-quarter performance and the lowered outlook for 2024. Despite the challenges faced in the quarter, the firm still regards Pactiv Evergreen as a strong performer in the plastic packaging sector.
The revised 2024 EBITDA guidance by Pactiv Evergreen, which is approximately a $50 million or roughly 6% decrease at the midpoint, is attributed in part to the underperformance and asset sale of Pine Bluff during the second quarter. This event accounts for about 2% or $16 million of the total reduction. The remaining approximately $34 million (4%) is due to weakness in end markets.
In light of these developments, RBC Capital has also lowered its estimates for Pactiv Evergreen's EBITDA for fiscal years 2024 and 2025 to $800 million and $850 million, respectively. Despite the lowered guidance and price target, the analyst expects a recovery in demand by 2025, which underpins the decision to maintain an Outperform rating on the stock.
In other recent news, Pactiv Evergreen reported its second-quarter 2024 earnings, which fell short of market expectations due to lower consumer demand and operational disruptions. The company is currently in the process of selling its Pine Bluff paper mill and Waynesville extrusion facility to Suzano. This transaction is expected to conclude in the fourth quarter of 2024.
Additionally, Pactiv Evergreen has revised its full-year guidance, expecting adjusted EBITDA to be between $800 million and $820 million, with capital expenditures around $260 million. The company aims to end the year with a net leverage ratio of approximately 4x and is planning to implement cost reductions to improve its financial health.
These are among the recent developments for Pactiv Evergreen, as the company continues its transformational journey amidst a challenging financial landscape.
InvestingPro Insights
As Pactiv Evergreen (NASDAQ: PTVE) navigates through its recent challenges, including a downward revision in its 2024 earnings guidance and a significant sell-off, investors may find it useful to consider some additional data and insights. According to InvestingPro, Pactiv Evergreen is currently trading at a low P/E ratio of 11.13 when adjusted for the last twelve months as of Q2 2024, which suggests the stock may be undervalued relative to its near-term earnings growth potential. This aligns with the InvestingPro Tip that the company's net income is expected to grow this year.
Moreover, the company's liquid assets are reported to exceed its short-term obligations, providing it with a degree of financial stability in the face of market weaknesses. Despite the recent price drop, with a 1-month total return of -13.55% and a 3-month total return of -24.88%, analysts predict Pactiv Evergreen will be profitable this year, which could signal a potential turnaround for the stock.
For investors looking for a more comprehensive analysis, there are additional InvestingPro Tips available on the platform, which include insights on shareholder yield and analyst earnings revisions. With these metrics in mind, interested parties may find value in exploring the full range of financial data and expert commentary available on InvestingPro for Pactiv Evergreen.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.