Amcor (AMCR) Up 9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Amcor (AMCR). Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amcor due for a pullback? 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 important drivers.
Amcor Q1 Earnings Beat Estimates, Revenues Dip Y/Y
Amcor reported first-quarter fiscal 2023 (ended Sep 30, 2023) adjusted earnings per share (EPS) of 16 cents, which surpassed the Zacks Consensus Estimate of 14 cents. The bottom line fell 11% from the year-ago quarter.
Including special items, the company reported net earnings per share of 11 cents compared with 16 cents in the prior-year quarter.
Total revenues fell 7.2% year over year to $3,443 million in the reported quarter. The downside was driven by a 2% unfavorable impact of items affecting comparability and a 1% impact of pass-through of lower raw material costs, partially offset by a 2% favorable impact of movements in foreign exchange rates. The top line surpassed the Zacks Consensus Estimate of $3,345 million.
The price/mix had benefits of around 2% on sales. The volume was down 8% from the year-ago quarter.
Cost and Margins
The cost of sales was down 8.1% year over year to $2,798 million. Gross profit fell 3.4% year over year to $645 million. The gross margin was 18.7% compared with the year-ago quarter’s 18%.
SG&A expenses were $302 million, flat year over year. Adjusted operating income was $358 million in the quarter, down 8.7% from $392 million in the prior-year quarter. The adjusted operating margin was 10.4% compared with 10.6% in the prior-year quarter. Adjusted EBITDA in the quarter was $459 million compared with $494 million in the prior-year quarter.
Segment Performances
Flexibles: Net sales decreased 8% year over year to $2,568 million. Volume was down 8% year over year due to lower consumer demand and customer destocking. Our model projected net sales of $2,562 million and a year-over-year volume decline of 9.7%. Adjusted operating income fell 5% year over year to $322 million. We expected an adjusted operating income of $313 million.
Rigid Packaging: The segment reported net sales of $875 million in the reported quarter, down 6% from the prior-year quarter. Volume was down 7% year over year. We expected net sales to be $861 million and volumes to fall 9.5% from the prior-year quarter. Adjusted operating income was $62 million, down 6% year over year due to lower volumes, partly offset by the price/mix benefits and a favorable cost performance. Our prediction for the segment’s operating income was $58 million.
Financial Updates
As of Sep 30, 2023, Amcor had $524 million of cash and cash equivalents compared with $689 million as of Jun 30, 2023. The company used $135 million of cash in operating activities in the first quarter of fiscal 2023 compared with $260 million in the year-ago quarter.
As of Sep 30, 2023, Amcor’s net debt totaled $6.6 billion, up from $6.1 billion as of Jun 30, 2023.
Amcor returned $205 million to shareholders in the third quarter as dividends and share repurchases. It has targeted total share repurchases of $70 million for fiscal 2024.
FY24 Guidance
The company reaffirms its adjusted EPS at 67-71 cents for fiscal 2024. AMCR projects an adjusted free cash flow of $850-$950 million for fiscal 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.25% due to these changes.
VGM Scores
At this time, Amcor has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Amcor has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Amcor is part of the Zacks Containers - Paper and Packaging industry. Over the past month, Packaging Corp. (PKG), a stock from the same industry, has gained 5.4%. The company reported its results for the quarter ended September 2023 more than a month ago.
Packaging Corp. reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of -8.9%. EPS of $2.05 for the same period compares with $2.83 a year ago.
For the current quarter, Packaging Corp. is expected to post earnings of $1.79 per share, indicating a change of -23.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Packaging Corp. Also, the stock has a VGM Score of A.
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