On Monday, Citi analyst Anthony Pettinari upgraded shares of Amcor Plc (NYSE:AMCR) from Neutral to Buy and increased the price target to $12.00, up from the previous $11.00. With the stock trading near its 52-week low of $8.78 and offering a substantial 5.47% dividend yield, InvestingPro data suggests the company is currently undervalued.
Pettinari cited the recent market sell-off as an opportunity, noting that Amcor's shares are now trading near what he estimates to be trough levels, with an EV/EBITDA multiple of 10.99x. This valuation adjustment comes in anticipation of Amcor's upcoming combination with Bemis Company (NYSE:BMS_old), Inc. (NYSE:BERY).
The Citi analyst sees the merger between Amcor and Bemis as a strategic move, enabling the market leaders to advance down the cost curve in the face of ongoing volatility challenges. With Amcor maintaining a Good Financial Health Score according to InvestingPro analysis and generating $13.55B in revenue, the merger could further strengthen its market position. He also highlighted the potential for the combined entity to benefit from increased procurement scale and enhanced research and development capabilities.
Despite expectations of subdued organic volume growth for packaging companies in the near term, Pettinari believes that producers with lower-risk growth drivers, such as the anticipated $530 million in cost synergies and $120 million in revenue synergies from the Amcor-Bemis deal, are positioned to outperform their peers.
Furthermore, Pettinari suggests that Amcor may surpass its initial synergy targets. He also points to other possible catalysts for the stock, including a sustained recovery in the Flexibles volumes and stabilization in the Rigids business sector. These factors contribute to Citi's positive outlook on Amcor's performance prospects following the recent sell-off.
In other recent news, Amcor Plc has been in the spotlight with several noteworthy developments. BofA Securities upgraded Amcor's shares from Underperform to Buy, anticipating a 28% return potential. This positive outlook is largely due to the anticipated merger with Berry, a significant event for Amcor, which is projected to generate around $650 million in synergies.
In addition, Amcor's first quarter financial performance for fiscal 2025 showed a 2% increase in overall volumes and a 5% year-over-year growth in adjusted earnings per share. Despite challenges in the healthcare sector and North American beverage demand, Amcor maintains its full-year guidance, projecting an adjusted earnings per share between $0.72 and $0.76, and a strong adjusted free cash flow of $900 million to $1 billion.
In governance news, Amcor's Annual General Meeting resulted in the election of ten directors for a one-year term each and the ratification of PricewaterhouseCoopers AG as the company’s independent registered public accounting firm for the fiscal year 2025. The company also received approval from shareholders on a non-binding advisory vote on the company's executive compensation.
The company also reported the sale of its 50% interest in Bericap North America for $122 million, a strategic move aimed at reducing debt. However, the company noted a 1% decrease in sales on a constant currency basis due to lower healthcare sales and a 4% decline in the Rigid Packaging (NYSE:PKG) segment's volumes due to weak demand in North American beverages.
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