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Amcor (AMCR) FY20 Earnings Surpass Estimates, Improve Y/Y

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Amcor Plc AMCR reported fiscal 2020 (ended Jun 30, 2020) adjusted earnings per share of 64 cents, which beat the Zacks Consensus Estimate of 63 cents. Notably, earnings improved 10% from the adjusted earnings of 58 cents per share in fiscal 2019. In constant currency terms, the bottom line improved 13% year over year, higher than the company’s expectation of an 11-12% growth. The improvement can be attributed to faster-than-expected synergies from the Bemis acquisition.

Including special items, the company reported net earnings per share of 38 cents compared with the prior-year quarter figure of 36 cents.

Total revenues declined 4% year over year to $12.47 billion in fiscal 2020. The top line also missed the Zacks Consensus Estimate of $12.57 billion. Sales declined 1.8% year over year in constant currency terms. Volumes improved 0.2% in the fiscal but were offset by an unfavorable price/mix of 0.4%.

Adjusted operating income in fiscal 2020 was $1,497 million compared with $1,433 million in the prior fiscal. Adjusted operating margin was 12%, indicating a 100 basis point expansion year over year. Adjusted EBITDA was $1,913 million, up 2% year over year.

Segment Performance

Flexibles: Net sales decreased 3% year over year to $9,755 million in fiscal 2020. Adjusted operating income increased 8% year over year to $1,335 million for fiscal 2020.

Rigid Packaging: The segment reported net sales of $2,716 million in fiscal 2020, down 6% year over year. Adjusted operating income declined 6% year over year to $290 million in fiscal 2020.

Financial Updates

As of fiscal 2020 end, Amcor had $602 million of cash and cash equivalents compared with $743 million as of the prior fiscal end. The company has access to $1.8 billion of liquidity in the form of undrawn committed bank facilities. It has no material refinancing to complete during the next 12 months.

Net cash flow from operating activities was around $1,384 million in fiscal 2020 compared with $776 million in the prior fiscal. Adjusted free cash flow (before dividends) was $1,220 million in fiscal 2020 compared with $970 million in the prior fiscal. The increase primarily reflects higher earnings and improved working capital performance.

As of Jun 30, 2020, Amcor’s net debt was $5,492 million compared with $5,502 million as of Jun 30, 2019. In June 2020, Amcor issued a €500 million Euro bond maturing in 2027 and a $500 million US bond maturing in 2030.

Amcor completed a $500 million share buy-back program in May 2020. Shares repurchased during fiscal 2020 led to a 3.5% reduction in total number of its outstanding shares. The company has also hiked its annual dividend to 46 cents per share.

Update on Bemis Integration

On Jun 11, 2019, Amcor had completed the all-stock acquisition of Bemis Company. The Bemis integration is progressing well with pre-tax synergy benefits of $80 million realized in fiscal 2020 — ahead of the targeted $65 million. The company continues to expect pre-tax synergy benefits of approximately $180 million by the end of fiscal 2022.

Fiscal 2021 Guidance

Amcor expects adjusted constant currency earnings per share growth of approximately 5-10% in fiscal 2021. This will be driven by continued organic growth from defensive consumer end markets, additional cost synergies and a lower share count. The company expects adjusted free cash flow between $1.0 billion and $1.1 billion in fiscal 2021. This guidance range includes pre-tax synergy benefits associated with the Bemis acquisition of approximately $50-$70 million.

Share Price Performance

Year to date, Amcor’s shares have gained 4.3%, against the industry’s decline of 0.7%.

Zacks Rank & Stocks to Consider

Amcor currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. SLGN, IIVI Incorporated IIVI and SiteOne Landscape Supply, Inc. SITE. Silgan Holdings and IIVI Incorporated sport a Zacks Rank #1 (Strong Buy), while SiteOne carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 28.7% for the current year. The company’s shares have gained 22% so far this year.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 37% year to date.

SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 41% year to date.

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