Transformational Berry Acquisition Will Unlock Powerful Long Term Packaging Synergies

Catalysts

About Amcor

Amcor is a global leader in consumer packaging and dispensing solutions for Nutrition, Health Care and Beauty and Wellness end markets.

What are the underlying business or industry changes driving this perspective?

• The transformational Berry acquisition is unlocking at least $260 million of annual synergies in fiscal 2026 and $650 million by fiscal 2028, with clear execution momentum that can structurally lift EBIT margins, EPS and free cash flow well beyond current expectations.
• Scale driven leadership in large, resilient categories such as pet care, dairy, health care and Beauty and Wellness is enabling Amcor to outgrow underlying markets through premium, complex packaging solutions, supporting durable mid to high single digit revenue growth and above average margin expansion.
• The expanded combined footprint across North America, Europe, Latin America and Asia, together with more than 10 active growth synergy initiatives, is accelerating cross selling and geographic expansion opportunities that can compound top line growth and drive operating leverage into earnings.
• Growing demand from brand owners for complete packaging systems, including containers, lids, seals and closures, is playing directly to Amcor’s integrated rigid and flexible capabilities, supporting higher value revenue synergies and structurally stronger net margins.
• Heightened customer focus on supply chain resilience and reliable partners is favoring Amcor’s broad multisite network and safety track record, which is already translating into sizeable new business wins, underpinning future volume growth and higher, more stable cash generation.

Assumptions

This narrative explores a more optimistic perspective on Amcor compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Amcor's revenue will grow by 14.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.3% today to 9.0% in 3 years time.
• The bullish analysts expect earnings to reach $2.3 billion (and earnings per share of $1.02) by about December 2028, up from $582.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.7 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, down from 32.6x today. This future PE is greater than the current PE for the AU Packaging industry at 20.5x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.65%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Volumes are already declining around 2% across the combined business, with particular weakness in European Flexibles and unconverted film. If this reflects a longer term shift in consumer demand or persistent affordability pressures rather than temporary softness, revenue growth could remain structurally below expectations and weigh on earnings.
• The bullish view assumes sustained synergy realization from the Berry acquisition, but integration is still in the early stages and depends heavily on ongoing cost cuts, headcount reductions and procurement savings. Any execution missteps, cultural friction or delayed synergy capture could compress net margins and limit EPS growth.
• Several categories that have historically grown mid to high single digits, such as broader Nutrition, meat, Foodservice and premium Beauty and Wellness, are currently experiencing softer demand as consumers trade down and become more value oriented. If this value seeking behavior becomes a secular trend it may cap pricing power and pressure both revenue and EBIT margins.
• Amcor is deliberately exiting noncore assets including North American beverage and smaller businesses while operating with leverage of about 3.6 times and elevated CapEx and integration costs. Weaker divestment proceeds, slower deleveraging or higher interest expense over time could erode free cash flow and constrain earnings growth.
• Competitive and substrate shifts in key markets, such as consumers favoring lower priced aluminum formats in multipack beverages and Amcor being underrepresented in faster growing private label channels, suggest that long term share gains are not guaranteed. Any sustained share losses would directly depress volumes, revenue and operating margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Amcor is $13.8, which represents up to two standard deviations above the consensus price target of $10.82. This valuation is based on what can be assumed as the expectations of Amcor's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.5, and the most bearish reporting a price target of just $9.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $25.8 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $8.23, the analyst price target of $13.8 is 40.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.