Amcor Plc AMCR reported third-quarter fiscal 2020 (ended Mar 31, 2020) adjusted earnings per share of 16 cents which matched the Zacks Consensus Estimate. Notably, the bottom line improved 23% year over year from the 13 cents per share in the prior-year quarter. The improvement can be attributed to momentum in the base business and faster–than-expected synergies from the Bemis acquisition.
Including special items, the company reported net earnings per share of 11 cents compared with the prior-year quarter figure of 10 cents.
Total revenues of $3,141 million in the reported quarter were up 36% from the year-ago quarter figure. However, the top line missed the Zacks Consensus Estimate of $3,250 million. Excluding negative currency impact of 3.0% and pass-through of lower raw material costs of 2.9%, the increase in net sales in the quarter was 42%. The increase can be attributed to favorable volumes of 2.0% and acquisition related impact of 40.5%. Unfavorable price/mix had a negative impact of 0.5%.
Amcor PLC Price, Consensus and EPS Surprise
Amcor PLC price-consensus-eps-surprise-chart | Amcor PLC Quote
Cost and Margins
Cost of sales surged 32% year over year to $2,489 million. Gross profit improved 55% year over year to $652 million. Gross margin came in at 20.8% compared with 18.2% in the prior-year quarter.
SG&A expenses increased 60% to $353 million year over year. Adjusted operating income was $360 million in the quarter compared with $230 million in the prior-year quarter. Adjusted operating margin was 11.5% compared with 10.0% in the prior-year quarter.
Flexibles: Net sales rose 54% year over year to $2,435 million. Adjusted operating income declined 4% year over year to $327 million.
Rigid Packaging: The segment reported net sales of $707 million in the reported quarter, up 12% from the prior-year quarter. Adjusted operating income was up 2% year over year to $72 million.
As of Mar 31, 2020, Amcor had $538 million of cash and cash equivalents and access to $1.4 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 $470 million in the nine-month period ended Mar 31, 2020 compared with $121 million in the prior-year comparable period. Adjusted free cash flow (before dividends) was $367 million in the nine-month period ended Mar 31, 2020 compared with usage of $31 million in the prior-year comparable period. The increase primarily reflects higher earnings and improved working capital performance.
As of Mar 31, 2020, Amcor’s net debt came in at $5,984 million, up from $5,502 million as of Jun 30, 2019, primarily due to the seasonality of cash flow generation and dividend payments.
During the nine months ended Mar 31, 2020, Amcor repurchased 51.5 million shares or 3.2% of its outstanding shares for $478 million. The company expects to complete the $500 million buy-back program by the end of fiscal 2020. Amcor’s board of directors declared a quarterly cash dividend of 11.5 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 $55 million realized so far this fiscal. Amcor continues to expect pre-tax synergy benefits of approximately $80 million in fiscal 2020, and remains on track to achieve $180 million (pre-tax) in synergy benefits by the end of fiscal 2022.
Fiscal 2020 Guidance
Amcor expects adjusted constant currency earnings per share growth of approximately 11-12% in fiscal 2020, up from its previous guidance of 7-10% growth. This is based on the assumption that the company, supply chain partners and customers will continue to operate with minimal disruption amid the coronavirus pandemic.
This growth expectation translates to earnings per share in the range of 64.6 to 65.2 cents per share compared with the band of 62-64 cents per share provided previously Amcor had reported earnings per share of 58.2 cents in fiscal 2019.
Share Price Performance
Over the past three months, Amcor’s shares have fallen 10.9%, compared with the industry’s decline of 14.2%.
Zacks Rank & Stocks to Consider
Amcor currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Ampco-Pittsburgh Corporation AP, Hudson Technologies Inc. HDSN and Energous Corporation WATT. While Ampco-Pittsburgh sports a Zacks Rank #1 (Strong Buy), Hudson Technologies and Energous Corporation carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ampco-Pittsburgh has an expected earnings growth rate of 2.70% for the current year. The stock has appreciated 6% in the past three months.
Hudson Technologies has a projected earnings growth rate of 83.9% for 2020. The company’s shares have gained 3% over the past three months.
Energous has an estimated earnings growth rate of 17.3% for the ongoing year. The company’s shares have rallied 8% in three months’ time.
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