Chart of the Week: The market may be underestimating Amcor’s long term potential
Our latest stock pitch.
Mentioned: Amcor PLC (AMC)
This week’s chart comes from equity analyst Esther Holloway’s stock pitch for Amcor.
The company develops and produces responsible packaging solutions across a variety of uses such as food, beverage, pharmaceutical and other products.
What has happened to shares?
Amcor has faced a tough few years of headwinds which leaves it currently trading at a deep discount.
- North America beverages falter: Lower customer demand and destocking in nonalcoholic beverages.
- Sales growth slows: Fiscal 2023 earnings guidance cut. Slowing growth in healthcare sales.
- Healthcare destocking: Lower customer demand and destocking weighs on medical and other rigid and flexible products.
- Trump Liberation Day: Creates general concern around consumption growth, trade, and economic activity.
- Healthcare recovers: Destocking looks done, but food and beverage volumes still soft.
- Cyclicality ongoing: Company guides for cyclical headwinds in fiscal 2026. Troubled North American beverages business likely to be sold.
Cyclicality to pass
In the main US market consumer demand faces headwinds from slowing population growth, given lower immigration, and a need to boost household savings in the face of much higher interest rates than a couple of years ago.
We think goods consumption will decelerate in the core US market in 2026, then rebound in the following years as the benefit of lower interest rates flow through and the tariff shocks abate.
We expect GDP growth in the US to trough in 2026, owing to the impact of tariffs, along with a separate downward impulse to consumption growth from more cautious households. Starting in 2027, growth should improve as the tariff impact fades, and the economy responds to monetary loosening.
Our investment thesis
High-quality earnings from healthcare will likely drive profit growth.
EBIT margins in healthcare are almost twice that of the core food and beverage category based on our estimates. With higher sales growth and much higher margins, we expect healthcare to account for about 40% of group earnings growth.
We forecast 6% revenue growth a year from the healthcare category with sales split almost evenly between pharmaceutical and medical customers. Most of these sales are in the US. A rapidly ageing population strengthens the earnings outlook through an uptick in healthcare services and medication.
The full stock pitch is available to Morningstar Investor subscribers and trialists.
You can find previous editions of Chart of the Week here.
