Amcor Earnings: Cost-Cutting To Hasten Recovery in Operating Profit Margins

We increase our fair value estimate for narrow-moat-rated Amcor by 9% to AUD 17.50 per share. The upgrade is primarily driven by a weaker Australian dollar, and secondarily, a less severe cyclical earnings trough in fiscal 2024 than we previously expected. At current prices, shares screen as undervalued. We think the market is skeptical of a return to earnings growth in the second half of fiscal 2024. However, we believe Amcor has taken appropriate steps to cut costs and a stabilization of consumer demand is likely with inflationary pressure gradually subsiding.