Amcor’s Softer Than Expected 2019 No Cause For Concern; Shares Fairly Valued

We make no change to our long-term outlook or fair value estimate for narrow-moat Amcor despite delivery of soft fiscal 2019 earnings. We were underwhelmed by organic growth in both Amcor’s flexibles and rigids segments. Consequently, constant currency EBIT of USD 1,050 million, excluding the one-month contribution to earnings from Bemis, was approximately 7% short of our forecast. But this provides us with no cause for concern and we continue to expect growth in population and per capita income to drive organic top-line growth of approximately 3% over the long-term. We also maintain our positive view of the tie-up with narrow-moat Bemis. Synergy realisation is set to begin in earnest in fiscal 2020. We update our estimates to reflect Bemis’ contribution to the enlarged plastic packaging powerhouse and forecast fiscal 2020 EBIT of USD 1,444 million. Amcor screens as fairly valued at current share prices.