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On Tuesday, Raymond (NSE:RYMD) James initiated coverage on Amcor Plc (NYSE:AMCR), a $13.5 billion packaging company with annual revenues of $13.54 billion, with a Market Perform rating, as the firm looks ahead to the expected completion of the Amcor/Berry merger by mid-2025. According to InvestingPro data, the company maintains a Good financial health score and offers investors a substantial 5.48% dividend yield. The analyst at Raymond James, Matt Roberts, provided insights on the company’s prospects amid the upcoming merger and current market conditions.
Roberts stated that while the merger between Amcor and Berry is progressing with regulatory approvals, he advises caution, suggesting that the market has already accounted for potential cost synergies in the stock price. "We are initiating coverage of AMCR at Market Perform. The Amcor/Berry merger is expected to close by mid-CY25, and given regulatory progress to-date we would take the under," he remarked. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with analysts setting price targets between $10.83 and $12.00.
The analyst expressed a positive outlook on the merger but noted that the current valuation of Amcor’s shares already reflects a conservative estimate of the cost synergies from the deal. This stance is taken in consideration of the challenging consumer and macroeconomic environment, which could impact the company’s growth. However, with a beta of 0.78 and a PEG ratio of 0.68, InvestingPro data suggests the stock offers relatively low volatility and attractive valuation relative to its growth prospects. Discover more insights and 8 additional ProTips about AMCR with an InvestingPro subscription.
Roberts elaborated on the need to observe actual growth before becoming more optimistic about the stock’s potential. "While we are constructive on the deal, investors seem to already bake in conservatism in cost synergies. As such, and in light of a tepid consumer/macro backdrop, we would prefer to await tangible evidence of growth with shares reflecting a fair relative valuation at current levels, in our opinion," he explained.
The Market Perform rating suggests that Raymond James believes Amcor shares will perform in line with the broader market expectations in the near term. Investors are likely to monitor the company closely as it approaches the merger completion date and navigates the current economic climate.
In other recent news, Amcor plc has provided new financial details regarding its merger with Berry Global Group (NYSE:BERY), Inc. The merger, which will result in Berry becoming a wholly-owned subsidiary of Amcor, includes unaudited pro forma financial statements filed with the SEC, covering the year ended June 30, 2024, and the six months ended December 31, 2024. These statements are intended to give investors a look at the financial landscape of the combined entity, although they do not predict future results. In terms of earnings, Amcor reported second-quarter results that met analyst expectations with an adjusted EPS of $0.16, though revenue fell short at $3.24 billion compared to the anticipated $3.36 billion. The company reaffirmed its fiscal year 2025 outlook, projecting adjusted EPS between $0.72 and $0.76, aligning with the current analyst consensus of $0.74 per share. Amcor’s adjusted EBIT for the quarter rose 5% on a comparable constant currency basis, reaching $363 million, marking the fourth consecutive quarter of sequential volume improvement. The company’s CEO, Peter Konieczny, expressed optimism about the merger with Berry Global, emphasizing the strategic benefits and potential for organic growth. Additionally, Amcor declared an increased quarterly cash dividend of 12.75 cents per share.
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