COMPANY NEWS & UPDATES
Amcor Plc ( AMC )
Hold Valuation $ 16.50
Earnings Forecast
Yr to June |
2020A |
2021F |
2022F |
|
Sales Revenue
($ M )
|
17,916 |
18,668 |
17,402 |
|
Reported
Profit ($ M )
|
1,428.4 1,711.0 |
1,649.4 |
EPS ( c ) |
89.2 |
109.7 |
108.3 |
Div ( c ) |
66.1 |
70.0 |
69.5 |
P / E ( x ) |
16.3 |
14.2 |
14.4 |
Yield (%) |
4.5 |
4.5 |
4.5 |
Franking (%) |
0.0 |
0.0 |
0.0 |
|
EPS Growth
(%)
|
23.8 |
23.1 |
-1.3 |
* Profit & EPS adjusted for options , goodwill , notional earnings and nonrecurring items .
Set to Over-deliver Against Synergy Targets
With Amcor now confident it can over-deliver relative to its prior cost synergy target associated with the ongoing Bemis integration , we raise our valuation to $ 16.50 per share . Synergy realisation remained on track in the third quarter of FY21 relative to Amcor ' s FY21 target of USD 70 million . However , with Amcor now insisting it can exceed its previously slated cost synergy target of USD 180 million by the end of FY22 , we lift our forecast of ultimate business integration benefits which have been conservatively positioned since the Bemis transaction was announced in FY19 .
We now factor USD 195 million in total Bemis synergies benefits by FY22 year-end , up from a prior USD 150 million . Consequently , we raise our mid-cycle EBIT margin forecast to circa 14.5 % from a prior 14.2 %, in turn driving the increase to our valuation . Soft demand for healthcare packaging drove weaker than expected third-quarter flexible packaging volumes . Nonetheless , we raise our full-year FY21 EPS estimate by 1 % USD 73.7 cents with net interest expense benefiting from the lower interest rate environment to a greater extent than we ' d previously factored . Our upgraded EPS forecast sits near the top end of Amcor ' s upwardly revised and tightened EPS guidance range of USD 73.2 cents – USD 73.8 cents .
We lower our full-year volume expectations for the flexibles segment by 50 basis points to 0.9 %, owing to a third-quarter showing that underwhelmed relative to our fullyear expectations . The flexibles segment is Amcor ' s largest , accounting for approximately 90 % of group operating income . While we ' d expected flexible volume growth would soften from its coronavirusinduced buoyancy in the first half , volumes modestly contracted in the third quarter .
North American and European healthcare packaging volumes continue to challenge the flexibles segment in late FY21 , as reduced levels of elective surgeries and subdued prescription medication trends amid the pandemic weigh on demand . Third-quarter rigid packaging volumes tracked our expectations for a slowdown following heady first-half growth inspired by elevated levels of athome consumption in North America .
While our volume outlook for FY21 has been modestly tempered , our long-term expectations for Amcor ' s global franchise remain largely unchanged . We continue to expect a moderation in the global economic recovery to provide a modest headwind to volume growth over the FY22 - FY23 period . Nonetheless , we anticipate a return to our longterm expectations of populationlinked packaging volume growth for both the flexible and rigid packaging businesses from FY24 onward . As such , our long-term expectations are largely unchanged and we continue to anticipate Bemis synergy delivery combined with modest operating leverage to drive EBIT margins toward 14.5 % at mid-cycle , providing for a 10-year EBIT CAGR of approximately 5 %.
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