Citi reiterates Buy rating on Ardagh Metal Packaging stock ahead of earnings

Investing.com - Citi has reiterated its Buy rating and $5.00 price target on Ardagh Metal Packaging (NYSE:PKG) S.A. (NYSE:AMBP), which currently trades at $4.57, ahead of the company’s second-quarter earnings report scheduled for Thursday before market open. According to InvestingPro data, the stock has shown remarkable momentum with a 71.6% return over the past six months.

The research firm expects Ardagh Metal Packaging could raise its EBITDA guidance from the current $695-$720 million to approximately $705-$725 million, reflecting strong demand in North America, ongoing volume growth in Europe, and modest upside from foreign exchange movements. InvestingPro analysis reveals that 4 analysts have recently revised their earnings estimates upward, with the company expected to return to profitability this year. Get access to 10+ additional exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Citi forecasts second-quarter EBITDA to increase 15% year-over-year to $204 million, compared to the company’s guidance of $195-$205 million and consensus estimates of $201 million, with growth projected in both regional segments and total company volumes up 5.6% year-over-year. The company’s last twelve months EBITDA stands at $629 million, while maintaining an attractive dividend yield of 8.75%.

For the Americas segment, Citi projects a $16 million year-over-year increase to $115 million, driven by 7% volume growth resulting in mid-teens percentage EBITDA growth, with Ardagh potentially outperforming the North American can industry due to favorable exposure to small and medium customers in energy and sparkling water categories. The company has demonstrated solid revenue growth of 4.42% over the last twelve months.

The European, Middle East and Africa beverage segment is modeled to increase $10 million year-over-year to $89 million as volume momentum continues with 4% growth and share gains versus competing substrates, partially offset by aluminum conversion costs.

In other recent news, Citi has predicted that July benchmark kraftliner prices will remain stable at $945 per ton. This expectation comes amid improved industry discipline, with North American producers demonstrating supply discipline through market downtime and mill closures. Notably, Cascades’ recent closure of its Niagara Falls facility marks the fourth major shutdown this year, which is anticipated to stabilize industry operating rates in the low-to-mid 90% range. Demand trends for June and early July appear mixed, as old corrugated container prices are at approximately two-year lows, indicating that activity isn’t particularly strong. Despite this, Citi expects low-single-digit year-over-year volume growth for June, according to upcoming Fibre Box Association data. U.S. kraftliner export prices to Mexico and Latin America remained flat in July, although year-to-date export shipments have decreased by 12% compared to last year. Shipments to China have notably declined by 58%, making it the fourth most common destination for U.S. exports, behind Mexico, Ecuador, and Canada.

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