TLDR
- Amcor stock dropped 9.9% to $13.57 after missing fourth-quarter earnings expectations
- Volume declines hit both flexible packaging (down 1.5%) and rigid packaging (down 2%)
- North American beverage packaging suffered over 5% volume drop with operational issues
- BofA Securities cut price target to $10 from $10.30 but maintained Buy rating
- Company plans to divest North American beverage business within two quarters
Amcor stock took a beating on Thursday, falling 9.9% to $13.57 after the global packaging company delivered fourth-quarter results that left investors wanting more. The selloff pushed shares near their 52-week low of $8.37.
The company’s fourth-quarter earnings before interest and taxes came in below analyst expectations. E&P Financial research head Cameron McDonald pointed to weaker volumes in North America as the primary culprit behind the disappointing performance.
Flexible packaging volumes declined 1.5% during the quarter, while rigid packaging saw a steeper 2% drop. The North American beverage and discretionary markets showed particular weakness, creating headwinds for the company’s overall performance.
BofA Securities responded to the results by lowering its price target on Amcor to $10.00 from $10.30. The firm maintained its Buy rating despite the cut, describing the fourth quarter as a likely “trough” relative to expectations.
Overall volumes fell 1.7% compared to BofA’s forecast of 0.5% growth. Flexible packaging margins reached only 14.1% versus the 15.5% estimate, falling short of analyst projections.
The rigid packaging segment faced its own challenges beyond volume declines. North American beverage packaging experienced a more severe drop of over 5%, while operating issues limited throughput capacity during the peak seasonal quarter.
Operational Challenges Mount
Weak price and mix trends in the rigid segment created a -4% headwind, resulting in a $20 million year-over-year negative impact on earnings before interest and taxes. These operational difficulties compounded the volume pressures already facing the business.
The fourth quarter also brought increased costs and higher corporate expenses. The rigids segment experienced the most substantial EBIT miss, according to McDonald’s analysis.
Amcor reported adjusted earnings per share of $0.20, falling one cent short of the consensus estimate of $0.21. The miss was primarily attributed to the 2% volume decline across both packaging segments.
Strategic Response Takes Shape
In response to the challenging North American market conditions, Amcor has initiated the divestment of its North American beverage and other ancillary businesses. Management expects this move to enhance portfolio quality and reduce debt levels.
The divestment strategy aims to support earnings growth from a lower base going forward. The company plans to stabilize its North American beverage operations over the next two quarters before bringing the business to market.
Despite the current headwinds, some analysts see potential upside ahead. McDonald believes integration synergies and potential buybacks could support longer-term value creation for shareholders.
E&P Financial forecasts Amcor’s earnings per share for fiscal year 2025 at US79.4¢, slightly below the company’s own guidance. The firm maintains a valuation of $16.25 per share despite near-term challenges.
BofA Securities noted that the lack of positive news on synergies and the gradual approach to strategic review contributed to recent share price weakness. The firm expects “meaningful” performance improvements in upcoming quarters.
Amcor currently offers investors a 5.13% dividend yield, providing some income cushion during this difficult period. The stock is trading near historically attractive valuation levels according to some metrics.
The company provided an optimistic forecast for fiscal 2026, suggesting strong growth following the Berry Global acquisition. Management remains focused on capturing synergies from recent deals while addressing operational challenges.
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