* Q2 EPS ex-items 54 cents, matches Wall Street view
* Revenue up 9 percent to $1.56 billion, tops Street
* Price increases outpace raw material costs
* Shares down 2.9 percent (Rewrites first two paragraphs; updates stock price)
By Roy Strom
NEW YORK, July 27 (Reuters) - Packaging producer MeadWestvaco Corp's MWV.N revenue beat and earnings matched Wall Street's forecasts, but the company's shares were down nearly 3 percent as investors fretted over rising raw material costs and the company's increased spending.
Richmond, Virginia-based MeadWestvaco said it expects earnings to improve "modestly" in the third quarter. It warned that second-half comparisons would be tougher because of strong results last year, rising raw material costs and economic uncertainty in the United States and Europe.
The company has so far been able to fend off rising input costs from hurting profit margins, as price rises made up 6 percent of revenue growth for the quarter. Price increases more than doubled the rise in materials costs, Chief Financial Officer Mark Rajkowski told Reuters.
Input cost inflation "was still stubbornly high. Our input costs -- energy, materials and freight -- were up $40 million," he said.
Revenue in the company's largest segment -- food, beverage and tobacco packaging -- grew 10 percent. Morningstar analyst Tom Mullarkey said the growth came from strong pricing and was helped by converting foreign currencies into the weaker U.S. dollar.
Sale volumes of cardboard in Brazil, where the company was investing $500 million to increase production, decreased year-over-year, Chief Executive John Luke said on a conference call with analysts.
Luke described the lag in Brazil's sales as temporary, the result of a "natural" slowdown in the country's economy after a robust 2010.
MeadWestvaco said it expects earnings in the third quarter to improve "modestly" from a year earlier.
Third-quarter results will depend on the strength of back-to-school spending in developed countries, said James Buzzer, the company's president.
"We're all holding our breath now because it's up to the consumer to come in and spend," he said.
The company's shares, which have gained about 23 percent so far this year, were down 2.9 percent in midday trading on Wednesday at $32.09.
Longbow Research analyst Joshua Zaret said he felt the company had a "solid performance" in the second quarter, but the market was reacting to the company's recent high amount of spending. In addition to the Brazil plant, it is investing $285 million to make its Covington, Virginia, mill self-powered.
"They didn't beat expectations, which you almost expect them to. But also people are realizing their capital expenditure is going to be at a very elevated level," Zaret said.
He said a typical year's spending for MeadWestvaco is $200 million to $300 million. Next year he expects the company to spend around $645 million, but added he thought the spending was a good decision by management.
Second-quarter net income rose to $89 million, or 51 cents per share, from $50 million, or 29 cents per share, a year earlier.
Excluding one-time items, the company posted earnings per share of 54 cents, matching the figure expected by Wall Street analysts, according to Thomson Reuters I/B/E/S.
Revenue rose 9 percent to $1.56 billion, topping the $1.52 billion analysts had expected. (Reporting by Roy Strom; additional reporting by Matt Daily and Ernest Scheyder; Editing by John Wallace and Maureen Bavdek)