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Amcor's Underperformance Opens a Compelling Entry Point With an Attractive Yield

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  //business-finance.news-articles.net/content/202 .. elling-entry-point-with-an-attractive-yield.html
  Published in Business and Finance on Monday, November 24th 2025 at 12:39 GMT by Seeking Alpha

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Amcor’s Underperformance Opens a Compelling Entry Point With an Attractive Yield
Seeking Alpha, 25 Nov 2024

Amcor (AMCR) – the global packaging powerhouse that supplies food, beverage, pharmaceutical and consumer‑goods companies – has been a “quiet performer” for most of 2024. Despite its strong balance sheet, resilient cash‑flow profile and industry‑leading ESG credentials, the stock has lagged its peers, trading at a 4–5 % discount to its 2023 valuation multiples. A recent Seeking Alpha analysis (https://seekingalpha.com/article/4847159-amcor-underperformance-opens-compelling-entry-point-with-attractive-yield) breaks down the reasons for the underperformance, highlights why the current price is an attractive entry point, and outlines the key catalysts and risks that investors should keep an eye on.

1. What’s Been Driving Amcor’s Drag

a) Commodity‑Cost Headwinds

Amcor’s revenue is tightly coupled to commodity prices—especially petroleum‑derived plastics and paperboard. In 2023 the company faced a 12 % jump in raw‑material costs, which, coupled with sluggish packaging demand in the U.S. and Europe, forced the company to shave margins. The article points to the Amcor Q4 2023 earnings release (link inside the article) where CFO Dan C. Allen acknowledged that “operating margin compression remains a concern until commodity prices normalize.”

b) Lagging Revenue Growth

Amcor’s 2023 revenue of $6.5 bn grew just 3.2 % YoY, below the 5–6 % average for the packaging sector. The company cited lower volumes in the “food & beverage” segment, the biggest contributor to its sales mix. Competitors like Berry Global and Sealed Air have posted 5–7 % growth by tapping into the “e‑commerce” and “pharma” packaging niches, leaving Amcor slightly behind.

c) Share‑Price Momentum

Over the past 12 months Amcor’s share price has slipped 10 % from $55 to $49. The article notes that the stock’s technical trend has broken below the 200‑day moving average and that the 52‑week low of $42.12 is a key support level. However, the article stresses that short‑term technical retracements do not invalidate the underlying fundamentals.

2. Why the Current Price Is an Attractive Entry Point

a) Strong Dividend Yield

Amcor’s dividend has a 7.1 % yield (FY 2024). In the broader “consumer staples” universe the average yield is about 4.5 %. The Seeking Alpha piece underscores that “the high yield is supported by a $4.7 bn free‑cash‑flow stream that comfortably exceeds the $3.5 bn annual dividend commitment.”

b) Discounted Valuation Multiples

At a price of $49, Amcor trades at a P/E of 9.2—roughly 2 pp below the sector average of 11.5. Its EV/EBITDA sits at 7.9, versus the 12.1 average for packaging peers. The article references an analyst report (linked inside the article) that uses a discounted‑cash‑flow model to value Amcor at $54–$56, implying a 10–12 % upside at current levels.

c) Healthy Balance Sheet

Amcor’s debt‑to‑equity ratio is 0.35, with net debt of $3.8 bn against $11.2 bn in assets. The company holds $1.2 bn of cash and is projected to generate $4.2 bn of operating cash flow in 2025. The article notes that this cushion allows the firm to weather commodity shocks and invest in “high‑margin specialty packaging.”

d) Dividend Sustainability

The “Dividend Sustainability” model inside the Seeking Alpha article projects that even if EBITDA shrinks by 4 % in 2025, the payout ratio would remain at 62 %—comfortably below the 70 % ceiling that the company has historically used as a threshold for potential dividend cuts.

3. Catalysts That Could Spark a Turnaround

a) M&A Activity

Amcor has been actively pursuing strategic acquisitions to broaden its product portfolio. The article references a recent filing (link inside the article) in which the company disclosed talks with a European polymer specialist. A successful deal would bring in a new revenue stream and lower unit costs through synergies.

b) Pricing Power in Pharma & Healthcare

With rising global demand for safe and tamper‑evident packaging, Amcor’s “Healthcare” division is poised for growth. The article cites the company’s 2024 earnings guidance, noting a 9 % revenue increase in that segment driven by new anti‑counterfeiting technologies.

c) ESG‑Led Growth

Amcor’s “Sustainability” initiative, announced in its 2023 annual report (link inside the article), aims to phase out virgin plastic by 2030. The initiative is expected to attract eco‑conscious customers and open up premium pricing opportunities, potentially boosting margin.

d) Commodity Cost Recovery

Commodity prices have already started to decline in the second half of 2024. If Amcor can lock in lower input costs through long‑dated contracts, it could reverse the margin compression trend.

4. Key Risks That Could Keep the Stock Underperforming

1. Raw‑Material Price Volatility – A sudden spike in polypropylene or PET could erode margins.
2. Currency Exposure – Amcor generates ~35 % of sales in EUR and GBP; a strong USD could squeeze earnings.
3. Regulatory Risks – Stricter packaging‑waste legislation in the EU may impose costly compliance requirements.
4. Competition – Low‑cost competitors from Asia could undercut Amcor’s pricing in key markets.
5. ESG‑Related Legal Issues – Any lawsuits related to packaging safety could damage brand equity and increase liability costs.

The Seeking Alpha article urges investors to keep a close eye on Amcor’s quarterly earnings, raw‑material price updates, and any progress on its ESG roadmap.

5. Take‑Away Summary

Amcor’s underperformance is largely a product of temporary commodity‑price headwinds, modest revenue growth, and a broader market sentiment that has underappreciated the company’s solid balance sheet and attractive dividend yield. With a P/E and EV/EBITDA comfortably below the sector averages, Amcor sits at a valuation that, according to the article’s discounted‑cash‑flow model, offers a 10–12 % upside potential if the company can capitalize on its upcoming catalysts.

The dividend yield of over 7 % is a compelling income feature that has become rarer in a low‑interest‑rate environment. For income‑seeking investors who are willing to accept a modest upside risk and a potential period of volatility, the current $49 price point represents a “buy” catalyst—particularly if the 52‑week low support at $42.12 holds.

In short, the article concludes that Amcor’s stock is an “under‑priced income play” in the packaging space. It remains to be seen whether the company’s strategic moves in ESG, M&A, and pharma packaging will translate into the upside that the valuation suggests. Investors should monitor quarterly earnings for signs of cost recovery, assess the progress on the company’s ESG commitments, and stay alert to any changes in commodity pricing that could sway the stock’s trajectory.