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Here's Why You Should Invest in Amcor (AMCR) Stock Now

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·5 min read
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Amcor Plc AMCR is well-poised for growth on the back of synergies from the Bemis acquisition, investing in growing share in high growth segments and emerging markets, and launching innovative products. Its segments, Flexibles and Rigid Packaging, are benefiting from strong demand across end markets. Consumers’ growing awareness and consequent increase in demand for sustainable packaged products is acting as a key catalyst.

The company currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's delve deeper into the factors that make Amcor a compelling investment option at the moment.

Solid Q4 Performance

Amcor reported fourth-quarter 2021 (ended Jun 30, 2021) earnings of 23 cents, which reflected an improvement of 17% from the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of 22 cents by a margin of 4.5%. The company has a trailing four-quarter earnings surprise of 2.9%, on average.

Strong Demand Supports Fiscal 2022 View

Amcor’s sales have gained from the stay-at-home trend amid the pandemic. The Flexibles segment has consistently witnessed solid growth across a broad range of end markets, including higher-value end markets like protein, coffee, cheese and pet food. The Rigid packaging segment is also seeing strong consumer demand. The company is witnessing strong beverage volumes and hot fill container volumes. This is due to higher-at-home consumption of packaged beverages. Brand extensions, and the introduction of new health and wellness oriented products in PET containers are also contributing to growth. Specialty container volumes is gaining on Improvement in certain categories including spirits, personal care and home cleaning.

Backed by ongoing momentum in end markets, Amcor expects adjusted constant currency earnings per share growth of approximately 7-11% in fiscal 2022. The guidance anticipates earnings per share in the range of 80 cents to 83 cents for fiscal 2022.

Price Performance

Shares of the company have gained 2% in the past three months, against the industry’s decline of 0.1%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Upbeat Growth Projections

The Zacks Consensus Estimate for Amcor’s fiscal 2022 earnings per share is currently pegged at 80 cents, indicating growth of 8% from fiscal 2021. The same for fiscal 2023 stands at 83 cents, suggesting a year-over-year improvement of around 3%. The estimates for 2022 and 2023 have moved up 3% and 2%, respectively, over the past 60 days.

The stock has an estimated long-term earnings growth rate of 6.3%.

Strategies to Grow Business in Place

Backed by its strong balance sheet and annual free cash flow in excess of $1 billion, Amcor continues to invest in growth, expanding capacity in higher-growth, more packaging-intensive segments like healthcare, protein and premium coffee or hot fill beverage containers and barrier films. Emerging markets will continue to be a key driver of organic growth. Amcor is constantly striving to stay ahead of the curve and meet ever-evolving consumer needs through innovation. To this end, the company invests around $100 million annually in R&D.

The company is investing in a major capacity expansion for one of its aluminum-based product segments at a Flexibles Packaging plant in Switzerland. It will support the continued high growth of the premium coffee segment and is underwritten by a long-term supply agreement with a key customer. Amcor has begun construction of a new greenfield plant in China to add capacity to its business in that high-growth market. It will be the largest in Amcor's China network and support a range of global and local customers, primarily in the food and personal care segments.

Amcor acquired Bemis Company in June 2019, creating a global leader in consumer packaging. The buyout expanded the company's global footprint, opened up new attractive end markets and customers for its products, and greater economies of scale that drove efficiencies and higher margins. The integration is almost complete, and Amcor currently expects total cost synergies in fiscal 2022 to be at least 10% higher than its original target of $180 million.

Owing to the surge in e-commerce activities, packaging has gained importance as it maintains the integrity and durability of a product during the complex delivery process. The pandemic has increased the value of packaging by ensuring hygiene and sterilization, and extended shelf life. Consumers’ increasing demand for more sustainable packaged products represents a major growth opportunity. Amcor has committed all of its packaging to be recyclable or reusable by 2025. Amcor has doubled the use of post-consumer recycled resin (PCR) in the last two years.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector are Belden Inc. BDC, Kadant Inc. KAI and Alcoa Corporation AA, all of which sport a Zacks Rank #1, at present.

Belden has an estimated earnings growth rate of 63.6% for the current fiscal. The company’s shares have risen 20% over the past three months.

Kadant has a projected earnings growth rate of 48.2% for fiscal 2021. In the past three months, the company’s shares have gained 21%.

Alcoa has an estimated earnings growth rate of 601.7% for the current fiscal. The company’s shares have appreciated 36% over the past three months.

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