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Results in: Are Amcor Limited shares a sell?

The Amcor Limited (ASX: AMC) share price will be one to watch on Monday following the release of the packaging company’s half-year result.

Here are key takeaways from the release:

  • First-half sales revenue of US$4,502.2 million, up 0.8% on the prior corresponding period but down 1.7% in constant currency terms.
  • First-half profit before interest and tax up 3.7% (0.8% in constant currency) to US$513.8 million. (Up 0.8% in constant currency)
  • First-half profit after tax increased 6.8% (3.7% in constant currency) to US$329.7 million.
  • Half-year earnings per share of 26.7 U.S. cents.
  • Interim dividend per share of 21 U.S. cents.

Overall I felt this was a bit of a mixed result from the packaging giant and may have fallen short of expectations.

The limited growth it has delivered during the six months to December 31 came from its Flexibles segment. That segment saw profit before tax increase 6.4% from US$373 million to US$396.8 million thanks to the benefits from restructuring initiatives and organic growth.

Looking ahead, management has guided to “modest growth” for the Flexibles segment in FY 2018 based on current raw material prices.

Its Rigid Plastics segment, on the other hand, delivered only negligible profit before tax growth during the half. Profit before tax came in at US$143.7 million due to volume challenges in the North American beverage segment. Pleasingly, these lower volumes were offset by cost savings and benefits of recently acquired businesses.

Management doesn’t expect much by way of improvement for the segment in the second-half and has provided guidance for flat segment profit year-on-year.

Should you invest?

Based on today’s result I estimate that Amcor’s shares are changing hands at approximately 18x trailing earnings. I don’t think this is particularly cheap for a company growing earnings on a constant currency basis in the low single digits.

In light of this, I would suggest investors avoid Amcor for the time being and consider rival Orora Ltd (ASX: ORA) instead. Though, it may be worth waiting for the release of its results later this week before investing.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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