Why the Amcor (ASX:AMC) share price is outperforming today

The Amcor CDI (ASX: AMC) share price is outpacing the broader market as leading brokers reiterated their buy calls following…
The post Why the Amcor (ASX:AMC) share price is outperforming today appeared first on The Motley Fool Australia. –

The Amcor CDI (ASX: AMC) share price is outpacing the broader market as leading brokers reiterated their buy calls following its results release yesterday.

Shares in the packaging giant jumped 2.3% to $16.50 in morning trade. In contrast, the S&P/ASX 200 Index (Index:^AXJO) gained a modest 0.3% at the time of writing.

The gains by the Amcor share price comes on top of yesterday’s 0.7% advance when management posted a 12% increase in first quarter adjusted earnings per share to US17.7 cents.

Amcor share price gains on market-beating results

The results were ahead of consensus forecast of US17 cents a share, according to Macquarie Group Ltd (ASX: MQG). The broker reiterated its “outperform” recommendation on the Amcor share price.

“Q1 is AMC’s weakest Q on seasonal basis given Northern Hemisphere summer,” said Macquarie.

“Q1 eps was 21.2% and 20.9% of FY eps in Q121 and Q120, respectively. Q122 represents 22.0% of our FY22 eps so running slightly ahead of traditional Q1 %.

“Quarterly dividend was increased to 12.0cps vs 11.75cps in the pcp.”

Macquarie’s 12-month price target on the Amcor share price is $18 a share.

Flexible earnings

Meanwhile, UBS also reiterated its “buy” rating on the shares after Amcor’s EPS came in 3% above its estimates.

“The EPS growth was underpinned by strong cost control/Bemis synergies as well as favourable product mix which more than offset significant raw material availability challenges,” said the broker.

Amcor’s flexible packaging division was the standout with earnings before interest and tax (EBIT) rising 9% in the September quarter to US$339 million compared to the same time last year.

In contrast, its rigid packaging division was weak as EBIT fell 14%. This is due to raw material shortages and supply chain disruptions caused by the COVID-19 pandemic.

Full year guidance gives Amcor share price a boost

Despite the challenges, Amcor reiterated its full year earnings guidance. Management is tipping constant currency EPS growth of between 7% and 11%. Consensus has pencilled in a rise of 8% – the lower end of guidance.

But with the strong first quarter performance, consensus may prove to be too conservative. Earnings upgrades could be in the wings.

“We are attracted to Amcor’s leading position across key global consumer packaging markets,” said UBS.

“The defensive nature of these markets as well as Amcor’s significant scale is clearly supporting earnings growth and cash flows despite significant volatility in raw material supply and pricing.”

M&A opportunities could provide extra tailwind

Further, the broker believes Amcor could have up to $1 billion in balance sheet capacity that could be used for an earnings accretive acquisition.

Good luck in finding a bargain to buy in these markets though. But that challenge doesn’t take anything away from Amcor’s strong results.

UBS’ 12-month price target on the Amcor share price is $18.83.

The post Why the Amcor (ASX:AMC) share price is outperforming today appeared first on The Motley Fool Australia.

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