The following excerpts explain why Zacks manufacturing sector analyst Mario Ricchio remains neutral on Pactiv Corporation (PTV), the packaging company:

'Pactiv Corporation reported third quarter EPS of $0.45, in line with our expectations and up 12.5% year-over-year, amid sales growth (from the Prairie Packaging acquisition) and lower selling, general and administrative (SG&A) expenses from lower advertising and promotional spending, partially offset by a decline in spread ( i.e. the difference between selling prices and raw material costs) due to increase in plastic resin prices.

'While gross margin declined year-over-year due to higher raw material costs, operating margins improved from lower SG&A expenses. Nevertheless, volume remains weak amid sluggish market conditions, and additional price hikes pose a risk of loss of market share. We maintain our Hold recommendation on shares of PTV.

'We have valued Pactiv Corporation using a P/E multiple. Currently, the stock is trading at 14.8x our downward revised 2007 earnings estimate of $1.83 per share, which is at a discount to the industry median multiple. Pactiv remains a strong brand name with a tremendous market position in both consumer products and food service packaging markets.

'However, the company's discounted valuation is justified given Pactiv's continued weak volume (especially in the food service/food packaging segment) amid sluggish market conditions. Hence, we do not expect a significant expansion in P/E multiple at this time. Our target price of $28.00 per share is based on a P/E of 15.3x our 2007 EPS estimate of $1.83.'