Amcor (AMC) – All in the timing

Amcor develops, produces, and sells packaging products in Europe, North America, Latin America, and the Asia Pacific. The company operates in two segments, flexibles and rigid packaging and sells its products through its direct sales force. The company was incorporated in 1926 and is headquartered in Zurich, Switzerland.

Ord Minnett has reviewed its Amcor (AMC) model following changes to packaging group’s valuation relative to sector peers and to incorporate data and commentary confirming a weak US retail environment, particularly in beverage products, as evidenced by a 13% slide in sales of energy drink Gatorade in mid-May to mid-June (Nielsen data), and a profit warning from food giant General Mills, whose brands include Betty Crocker, Häagen-Dazs and Old El Paso.

We do expect robust increases in EPS in the near term as Amcor harvests virtually all its targeted cost savings from the Berry acquisition in FY26, albeit we forecast these to fade to circa 80% of targeted savings by year 4. There is potential for further earnings upside if management can achieve targets laid out in the merger papers for operating earnings growth of 6% in Amcor’s core business versus 4% from the Berry operations. That said, the US retail environment poses a threat to June-quarter earnings, and while the valuation premium Amcor stock held over its US peers has narrowed considerably, it is not yet trading in line with the broader sector.

We maintain our Hold recommendation on Amcor but raise our target price to $14.50 from $14.00 to reflect changes to valuations in the US packaging sector.

‍