TLDR
- AMCR closed at $9.32 on May 2, up 2.64%
- Q3 sales and EBIT rose slightly; EPS grew 5%
- Dividend yield stands at 5.5%, but payout looks stretched
- North American beverage volumes remained weak
- Synergies from Berry merger target $650 million over 3 years
Amcor plc (NYSE: AMCR) shares closed at $9.32 on May 2, up 2.64% after the packaging giant reported modest Q3 growth on April 30th, while warning of ongoing demand softness in North America.
Net sales for the quarter reached $3.3 billion, slightly ahead of last year, with EBIT rising to $384 million. However, while earnings per share grew by 5%, Amcor’s cash flow pressure and a stretched dividend payout are drawing investors’ caution.
Q3 Results Show Resilience Amid Headwinds
Amcor’s flexibles segment posted 1% volume growth, with EBIT margins stable at 13.7%. However, its rigid packaging business struggled, with sales down 3% and volumes falling 2% year over year, driven by weak beverage demand in North America.
Despite headwinds, Amcor raised its quarterly dividend by 2% to $0.1275, offering a 5.5% yield. The company expects free cash flow between $900 million and $1 billion for the year and maintains its fiscal 2025 EPS guidance of $0.72 to $0.74.
Berry Merger Synergies Boost Long-Term Outlook
Amcor’s merger with Berry Global, finalized earlier than expected, is a key driver for future growth. The deal is expected to deliver $650 million in synergies over the next three years, with $260 million projected to benefit fiscal 2026 earnings.
Management also targets annual cash flow exceeding $3 billion by fiscal 2028, which could support further M&A activity and dividend stability. The company’s growing R&D investment—$180 million annually with 1,500 researchers—aims to enhance product innovation and competitiveness.
Dividend Sustainability Questioned
While Amcor offers an attractive yield, the company paid out 102% of its cash flows in the last cycle, raising sustainability concerns. Analysts expect EPS to expand 39% over the next year, which could reduce the payout ratio to 67%, a more manageable level.
Still, cash outflows of $17 million year-to-date and leverage at 3.5 times remain watchpoints. Amcor plans to reduce leverage to 3 times by fiscal 2026. With muted volume growth expected in Q4 amid macro uncertainties and tariff risks, some question whether current dividend levels can be maintained long term.
Amcor shares have edged higher following its Q3 results, but soft North American demand and elevated payouts may limit upside near term. Investors will watch Q4 closely to gauge whether cost savings from the Berry deal can offset weaker volumes and sustain shareholder returns.
