Orora Ltd. (ORA: AU) (OTC: ORRAF) received an upgrade from Jefferies from a Hold to a Buy rating, with an increased price target set at AUD3.00, up from the previous AUD2.40. The firm highlighted several factors contributing to the positive outlook on the company's stock.
Jefferies pointed to a series of developments that are expected to benefit Orora, including balance sheet remediation and earnings momentum. The anticipated earnings boost is linked to the unwinding of the glass destocking cycle and returns on capital expenditure in domestic beverage cans.
These elements, combined with potential future capital returns and a speculative market environment, are projected to narrow the gap between the current share price and the firm's sum-of-the-parts (SOTP) valuation.
The analyst drew comparisons to the period following the fiscal year 2019 sale of Orora Fibre Packaging (NYSE:PKG) (AFP), where expectations for a break-up of the company did not come to fruition. However, this time around, the difference is attributed to a more favorable earnings momentum driven by cyclical factors and heightened speculative interest in the company.
Jefferies' assessment suggests that these conditions create a more conducive backdrop for Orora's share price to align more closely with the firm's valuation expectations. The new price target of AUD3.00 reflects this improved outlook for the company's financial performance and market position.
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