Amcor (AMCR) Down 0.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since Amcor (AMCR) last reported earnings. Shares lost about 0.7% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amcor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Amcor’s Q3 results soared, while revenues declined YoY due to low volumes

Amcor reported fiscal third-quarter 2024 adjusted earnings per share (EPS) of approximately 18 cents, beating the Zacks Consensus Estimate of 17 cents. This represents an increase of 1.7% compared to the prior-year quarter, marking a return to growth after four consecutive quarters of declines. This increase is primarily attributed to the realization of benefits from structural cost initiatives.

Including extraordinary items, the company reported earnings per share (EPS) of 13 cents, compared with 12 cents in the year-ago quarter.

Total revenue fell 7% year-over-year to $3.4 billion. The top line missed the Zacks Consensus Estimate of $3.53 billion.

Price/mix had an unfavorable impact on sales of approximately 3%. Volume declined 4% compared to the prior-year quarter due to weak demand in the healthcare and beverage categories in North America. Acquisitions contributed to growth by 1%. The 1% favorable impact of exchange rate changes was offset by the 2% impact of the pass-on of lower raw material costs.

While volume growth remained negative, it was better than expected and improved from the 10% decline recorded in the second quarter of fiscal 2024.

Cost and margins

Cost of sales decreased 9% year-over-year to $2.7 billion. Gross profit increased 3% year-over-year to $692 million. Gross margin was 20.3% compared to 18.4% in the same quarter last year.

Selling, general and administrative expenses were $330 million, up 4% year-over-year. Adjusted operating income was $397 million, up 4% from $382 million in the year-ago quarter. Good cost performance and benefits from restructuring initiatives helped offset the impact of lower volumes and unfavorable price/mix impacts.

Adjusted operating margin was 11.6% compared to 10.4% in the year-ago quarter. Adjusted EBITDA for the quarter was $499 million, compared to $484 million in the prior-year quarter.

Segment appearances

Elastic: Net sales declined 7% year-over-year to $2.6 billion. Volume declined 2% year-over-year due to inventory sell-offs in healthcare categories, and price/mix was an unfavorable 4%.

Adjusted segment operating income increased 6% year-over-year to $358 million, reflecting gains from strong cost performance and restructuring activities.

Rigid packaging: The segment reported net sales of $813 million for the quarter, down 8% from the same quarter last year. Volume declined 8% year-on-year, reflecting lower beverage volumes amid weak demand in key categories. This was to some extent offset by a favorable price impact on the assortment of 1%.

Adjusted operating income was $71 million, up 3% year-over-year, as favorable cost performance helped offset the impact of lower volumes.

Cash flow and balance sheet updates

At the end of the third quarter of fiscal 2024, Amcor had $457 million in cash and cash equivalents, compared to $689 million at the end of fiscal 2023. During the first nine-month period of fiscal 2024, the company generated $378 million of cash from operations compared to $329 million dollars in the comparable period a year earlier.

As of March 31, 2024, Amcor’s net debt was $6.7 billion, compared to $6.1 billion as of June 30, 2023.

During the nine months ended March 31, 2024, Amcor returned $572 million to shareholders through dividends and share repurchases. It intended to repurchase a total of $70 million in shares in fiscal 2024. Amcor’s board had previously raised its quarterly cash dividend to 12.5 cents per share from the previous payout of 12 cents per share.

Guidance for FY24

The company updated adjusted EPS to 68.5-71 cents from the previously reported 67-71 cents for fiscal 2024. AMCR forecasts adjusted free cash flow of $850-950 million for fiscal 2024.

How have estimates changed since then?

Analysts have been quiet over the past two months as none of them have issued any earnings estimate revisions.

VGM results

At this point, Amcor has a Weak Growth Rating of F, however its Momentum Score is doing slightly better at a D. Plotting a somewhat similar path, the stock is given a C rating on the value side, placing it in the middle 20% for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Amcor carries a Zacks Rank #2 (Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

Amcor is part of the Zacks Containers – Paper & Packaging industry. Over the past month, Packaging Corp. (PKG) from the same industry gained 2.9%. More than a month ago, the company published its results for the quarter ended March 2024.

Packaging Corp. reported revenue of $1.98 billion in the most recent quarter, representing a +0.2% year-over-year change. EPS of $1.72 in the same period compared to $2.20 a year ago.

Packaging Corp. is expected to for the current quarter will see earnings per share of $2.10, representing a year-over-year change of -9.1%. Over the past 30 days, the Zacks Consensus Estimate has moved -0.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Packaging Corp. The company’s stock also received a VGM Score of C.

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