A month has gone by since the last earnings report for Amcor (AMCR). Shares have lost about 0.4% in that time frame, 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 important catalysts.
Amcor Q4 Earnings Beat, Decline Y/Y on Low Volumes
Amcor reported fourth-quarter fiscal 2023 adjusted earnings per share (EPS) of 19 cents, which beat the Zacks Consensus Estimate of adjusted EPS of 18 cents. The bottom line declined 21% from the prior-year quarter due to lower volumes, This was partially offset by price/mix benefits. Including special items, the company reported EPS of 12 cents, up 76% from the prior-year quarter’s EPS of 7 cents.
Total revenues for the quarter were $3,673 million, which missed the Zacks Consensus Estimate of $3,866 million. Revenues were down 6% in comparison with the year-ago quarter which included an unfavorable impact of approximately 2% related to items affecting comparability and price increases of 1%. Movements in foreign exchange rates had no material impact on the quarter’s net sales.
Net sales on a comparable constant currency basis were 5% down year over year. Volumes were down 7%. This was somewhat offset by price/mix benefits of approximately 2%. The volume decline witnessed in the reported quarter was lower than our projection of a 5% decline. The weaker-than-expected performance was mainly due to soft demand as well as customer destocking in both segments. Realized price/mix benefits were also lower than our expectation of 4.5% growth for the quarter.
Costs and Margins
The cost of sales decreased 5% year over year to $2,951 million. Gross profit dipped 9% year over year to $722 million. The gross margin was 19.7% for the quarter under review, a contraction from 20.3% reported in the prior-year quarter. SG&A expenses declined 4% year on year to $329 million from $342 million in the prior-year quarter. Adjusted operating income was $436 million, down 13.7% from $505 million in the prior-year quarter. The adjusted operating margin was 11.9%, compared with 12.9% in the prior-year quarter.
Adjusted EBITDA in the quarter was $540 million in the fourth quarter of fiscal 2023, compared with $609 million in the fourth quarter of fiscal 2022. Adjusted EBITDA margin was 14.7%, a 90 basis point contraction year over year.
The Flexibles segment’s net sales decreased 6% year over year to $2,777 million. The decline included a favorable impact of approximately 1% related to movements in foreign exchange rates, an unfavorable 3% impact from items affecting comparability and price increases of 1%. On a comparable constant currency basis, net sales declined 5% year over year on 7% lower volumes, partly offset by price/mix benefits of 2%.
The Rigid Packaging segment’s net sales were $897 million in the quarter under review, down 5% from the prior-year quarter. This included an unfavorable impact of 1% related to movements in foreign exchange rates. On a comparable constant currency basis, net sales were down 4% from the last year quarter due to 6% lower volumes, partly offset by price/mix benefits of approximately 2%.
The Flexibles segment’s adjusted operating profit was $387 million, marking an 14% decline from the prior-year quarter’s figure. Adjusted operating profit for the Rigid Packaging segment declined 24% year over year to $73 million. Operating profit of both segments bore the impact of low volumes, increased volatility in customer order patterns, unfavorable mix trends and cost inflation. However, improved pricing and savings from cost-reduction initiatives had somewhat dampened the impact.
As of the end of fiscal 2023, Amcor had $689 million of cash and cash equivalents, compared with $775 million at fiscal 2022 end. The company generated $1.26 billion in cash from operating activities in fiscal 2023, compared with $1.53 billion in the prior fiscal. As of Jun 30, 2023, Amcor’s net debt totaled $6,057 million.
Amcor returned $1.2 billion to shareholders through fiscal 2023 as dividends and share repurchases. It has targeted total share repurchases of $70 million for fiscal 2024.
Fiscal 2023 Performance
Amcor reported adjusted EPS of 73 cents in fiscal 2023, surpassing the Zacks Consensus Estimate of EPS of 72 cents. Earnings came within the company’s guidance of 72-74 cents per share. The bottom line declined 9% year over year.
Including special items, Amcor reported EPS of 71 cents, compared with EPS of 53 cents in fiscal 2022.
Total revenues improved 1% year over year to $14.7 billion but missed the consensus estimate of $14.8 billion. On a comparable constant currency basis, net sales were in line with the prior fiscal, reflecting price/mix benefits of approximately 3% while volumes were down 3%. Our projection was a price/mix gain of 3.8% and a volume decline of 2.8% for fiscal 2023.
Fiscal 2024 Guidance
Adjusted EPS for fiscal 2024 is expected to be in the band of 67-71 cents. The company projects adjusted free cash flow of $850-$950 million in fiscal 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -7.53% due to these changes.
Currently, Amcor has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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, Berry Global (BERY), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended June 2023 more than a month ago.
Berry Global reported revenues of $3.23 billion in the last reported quarter, representing a year-over-year change of -13.3%. EPS of $1.90 for the same period compares with $2.03 a year ago.
For the current quarter, Berry Global is expected to post earnings of $2.15 per share, indicating a change of -1.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
Berry Global has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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