Shares of Pactiv Evergreen (PTVE 1.77%), a leading manufacturer of food packaging items, were pulling back today after the company posted disappointing top-line results in its fourth-quarter earnings report.
As of 12:23 p.m. ET, the stock was down 9.8%.
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Pactiv Evergreen comes up short
Shares of the restaurant industry supplier reported a 14% decline in revenue in the fourth quarter to $1.27 billion, which compared to analyst estimates of $1.32 billion.
The decline was largely expected after Pactiv closed a mill in North Carolina as part of its strategy of pivoting away from its legacy beverage manufacturing operations. The company also cited lower sales volume, unfavorable pricing due to lower material costs that are passed on to customers, and an unfavorable sales mix as reasons for the lower revenue.
That strategy did pay off on the bottom line as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from $167 million to $207 million. Adjusted earnings per share, which eliminates restructuring costs, improved from $0.17 to $0.33, which beat estimates at $0.21.
Pactiv Evergreen also announced another restructuring plan it's calling a "footprint optimization" that is expected to deliver cost savings of $35 million by 2026 and incur restructuring charges of $70 million to $105 million.
CEO Michael King said, "The company made significant progress on multiple fronts of its transformational journey in 2023," adding, "Looking ahead to 2024, the company plans to initiate the next phase of its strategic transformation through a footprint optimization plan, which will include the rationalization of a portion of the company's production capacity."
What's next for Pactiv Evergreen?
Management expects adjusted EBITDA of $850 million to $870 million in 2024, which represents a slight improvement from $840 million in EBITDA in 2023.
While investors may dislike the double-digit revenue decline and another restructuring plan, the improvement on the bottom line seems to indicate the company is moving in the right direction. Trading at a price-to-earnings ratio of 14, the stock looks reasonably priced, especially if the cost-cutting programs can deliver the desired results.
