Amcor (AMCR) Down 1.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Amcor (AMCR). Shares have lost about 1.9% 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 Q2 Earnings Beat Estimates, Revenues Dip Y/Y
Amcor reported second-quarter fiscal 2023 adjusted earnings per share (EPS) of 16 cents, which surpassed the Zacks Consensus Estimate of 15 cents. The bottom line fell 15% from the year-ago quarter, mainly due to the downtrend in volumes reflecting customer destocking.
Including special items, the company reported net EPS of 9 cents compared with 31 cents in the year-ago quarter.
Total revenues fell 11% year over year to $3.25 billion in the reported quarter. The price/mix had benefits of around 1% on sales. The volume was down 9% from the year-ago quarter. A 2% favorable impact of movements in foreign exchange rates was offset by a 2% unfavorable impact of items affecting comparability and a 1% impact of pass-through of lower raw material costs. The top line missed the Zacks Consensus Estimate of $3.29 billion.
Cost and Margins
The cost of sales was down 12% year over year to $2.63 billion. Gross profit fell 6% year over year to $621 million. The gross margin was 19.1% compared with the year-ago quarter’s 18.2%.
SG&A expenses were $299 million, reflecting an increase of 0.3% year over year. Adjusted operating income was $352 million in the quarter, down 12% from $399 million in the year-ago quarter. The adjusted operating margin was 10.8% compared with 11% in the year-ago quarter. Adjusted EBITDA in the quarter was $454 million compared with $500 million in the prior-year quarter.
Segment Performances
Flexibles: Net sales decreased 12% year over year to $2.48 billion. Volume was down 10% year over year due to lower consumer demand and customer destocking. Our model projected net sales of $2,535 million based on an expectation of a year-over-year volume decline of 8% and a favorable price/mix of 1%.
The segment’s adjusted operating income fell 12% year over year to $312 million on lower volumes, partly offset by strong operating cost performance. We expected an adjusted operating income of $319 million.
Rigid Packaging: The segment reported net sales of $770 million in the reported quarter, down 7% from the year-ago quarter. Volume was down 12% year over year, which was offset by a favorable price/mix impact of 2%. We had projected net sales at $784.6 million, a year-over-year volume decline of 7.7% and a price/mix benefit of 1%.
Adjusted operating income was $51 million, down 10.5% 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 $59.5 million.
Financial Updates
As of Dec 31, 2023, Amcor had $430 million of cash and cash equivalents compared with $689 million as of Jun 30, 2023. The company generated $228 million of cash in operating activities in the first half of fiscal 2024 compared with $145 million in the year-ago comparable period.
As of Dec 31, 2023, Amcor’s net debt totaled $6.6 billion, up from $6.1 billion as of Jun 30, 2023.
Amcor returned $390 million to shareholders in the first half of fiscal 2024 through dividends and share repurchases. It has targeted total share repurchases of $70 million for fiscal 2024. Amcor’s board of directors raised its quarterly cash dividend of 12.5 cents per share from the previous payout of 12 cents per share.
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 revision.
The consensus estimate has shifted -9.91% due to these changes.
VGM Scores
At this time, Amcor has a nice Growth Score of B, 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 quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 these revisions indicates a downward shift. Notably, Amcor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Amcor belongs to the Zacks Containers - Paper and Packaging industry. Another stock from the same industry, Packaging Corp. (PKG), has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Packaging Corp. reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $2.13 for the same period compares with $2.35 a year ago.
For the current quarter, Packaging Corp. is expected to post earnings of $1.63 per share, indicating a change of -25.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Packaging Corp. Also, the stock has a VGM Score of A.
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Amcor PLC (AMCR) : Free Stock Analysis Report
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