Pactiv shares jump on 2Q profit that beat Wall St.

Pactiv shares added $1.48, or 6.7 percent, to close at $23.54.

The Lake Forest, Ill., company, which also makes paper and aluminum packaging, said Tuesday after the market closed that adjusted earnings per share for the three months ended June 30 was 50 cents, 2 cents better than analysts expected, according to a Thomson Financial poll.

Sales rose to $951 million from $828 million, ahead of analysts' expectation of nearly $931.2 million.

Although the company cut its full-year 2008 guidance to a range of $1.58 to $1.74 per share from a range of $1.85 to $2.05 per share, citing surging resin costs, analysts Wednesday focused on strengths in the second quarter.

KeyBanc Capital Markets analyst Christopher Manuel said he was "quite encouraged by what appears to be positive organic growth in the quarter, compared to our assumption of low single-digit declines." He reiterated his "Buy" rating and $30 price target.

Goldman Sachs analyst Richard Skidmore credited the results "to better volume growth across both segments, as well as slightly lower corporate costs and interest expense than we forecasted." He reiterated his "Neutral" rating and $26 price target.

Citi Investment Research analyst Timothy Thein said the second-quarter "earnings quality was strong." He reiterated his "Buy" rating and $30 price target.

"With the stock trading at a discount to the overall market, we believe the significant catalysts likely to come over the next 12 months or so have not been adequately reflected in the price," Thein wrote, a view also held by Wachovia Capital Markets analyst Ghansham Panjabi.

"With the stock generating $200+ million in free cash flow and underperforming the group, we believe Pactiv is trading at attractive levels for one of the best run packaging names," Panjabi said.