On Tuesday, Stifel began coverage on Amcor Plc (NYSE:AMCR) with a Hold rating and established a price target of $10.80. The firm pointed to Amcor's historical performance and current market challenges as key factors influencing their rating.
Amcor, a packaging company, has experienced a compounded annual growth rate (CAGR) of 0.7% in organic volume over the five years before the pandemic. Additionally, mergers and acquisitions have contributed to a top-line five-year CAGR of 3.8%.
The company's significant Bemis acquisition, which was intended to be transformational, has not yielded the anticipated benefits. Since the acquisition, Amcor's return on invested capital (ROIC) has declined by 490 basis points, and growth has continued at a slow pace. The analyst cited Amcor's history of sluggish organic growth and the impact of regulatory headwinds on the valuation of its shares.
Amcor is currently implementing strategies aimed at improving growth and expanding margins. However, the Stifel report suggests that the present discount in Amcor's share valuation is warranted due to the uncertainties posed by the increasing demand for sustainable packaging solutions. These uncertainties are compounded by the potential challenges arising from regulatory changes in the industry.
The analysis by Stifel reflects caution regarding Amcor's ability to navigate the evolving demands for environmentally friendly packaging and the effects of regulatory developments on its business operations. The Hold rating and the price target of $10.80 are reflective of these considerations.
In other recent news, Amcor Plc reported a return to earnings growth in its Third Quarter 2024 Results Call, surpassing expectations and subsequently raising its full-year adjusted earnings per share (EPS) guidance. Key segments, including Flexibles and Rigid Packaging (NYSE:PKG), demonstrated volume improvements and earnings growth due to strategic positioning, strong customer relationships, and ongoing cost reduction efforts. Despite challenges, Amcor reaffirmed its adjusted free cash flow guidance for the fiscal year.
In another recent development, Wells Fargo (NYSE:WFC) initiated coverage on Amcor with an Equal Weight rating and a price target of $9.80. The firm anticipates that Amcor could see organic volume growth in 2025, despite current de-stocking trends affecting the healthcare sector and North American beverage markets. Wells Fargo also positively mentioned the leadership of interim CEO, Mr. Konieczny.
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