Amcor's Fiscal Q3 Earnings Rise Amid Revenue Challenges: A Closer Look at the Merger's Impact

Amcor plc (AMCR) reported mixed results for its fiscal third quarter ended March 31, 2025, with adjusted earnings per share (EPS) hitting $0.18—matching both estimates and prior-year performance—despite a 2.3% year-over-year decline in net sales to $3.33 billion. While the company narrowed its full-year EPS guidance to $0.72–$0.74, signaling cautious optimism, its recurring revenue misses and a Zacks "Sell" rating highlight lingering investor skepticism. Here’s why the results matter and what they mean for shareholders.

Ask Aime: Why did Amcor's earnings surprise?

The Earnings Paradox: Higher Profits, Lower Sales

Amcor’s ability to grow net income to $196 million (up 5% year-over-year) while sales fell underscores its focus on cost discipline. Adjusted EBIT remained flat at $384 million, with margin improvements in both its Flexibles (+4%) and Rigid Packaging (+10%) segments. Strong volume growth in healthcare, meat, and single-serve coffee packaging offset softness in North American beverages and healthcare destocking.

Ask Aime: Why is Amcor's EPS flat despite declining sales?

The merger with Berry Global, finalized in Q3, is central to this resilience. While synergies from the $6.5 billion deal—projected to deliver $650 million in cumulative savings by 2028—are excluded from fiscal 2025 guidance, management highlighted its transformative potential. “This merger strengthens our position in high-growth categories like healthcare and sustainable packaging,” said Interim CEO Peter Konieczny, pointing to expanded material science capabilities and a global scale that could drive 12% EPS accretion by 2026.

Revenue Stumbles and Analyst Concerns

The fourth consecutive revenue miss—this time by 4.37%—reflects broader challenges. Foreign exchange headwinds and price/mix pressures (a 3% drag on sales) suggest pricing power and geographic exposure remain issues. While the Flexibles segment grew 1% organically, Rigid Packaging sales fell 5% year-over-year due to weak North American beverage demand.

Analysts at Zacks Investment Research remain bearish, assigning a #4 “Sell” rating due to negative earnings estimate revisions. The stock’s 0.9% year-to-date decline, outperforming the S&P 500’s 5.5% drop, hints at cautious optimism, but the path to top-line growth remains unclear.

The Narrowed Outlook: A Balance of Caution and Ambition

Amcor’s revised EPS guidance (tightened from $0.72–$0.76 to $0.72–$0.74) reflects a focus on precision. Management cited a 4% headwind from normalized incentive compensation payments but reaffirmed its $900–$1.0 billion free cash flow target. A dividend hike to $0.1275 per share signals confidence in cash flow stability, even as net debt rose to $6.75 billion. The leverage ratio of 3.5x adjusted EBITDA, however, remains above the 3.0x target for year-end 2025—a red flag for debt-sensitive investors.

Conclusion: A Merger-Driven Gamble with Near-Term Risks

Amcor’s Q3 results are a microcosm of its strategic dilemma: a merger that promises long-term growth but faces immediate execution hurdles. On one hand, the Berry deal’s $260 million in 2026 synergies and the company’s 5% year-to-date stock rise suggest patient investors could be rewarded. On the other, recurring revenue misses, a Zacks Sell rating, and a leverage ratio above targets highlight near-term vulnerabilities.

The narrowed guidance and dividend increase signal management’s confidence in cash flow resilience, but investors must weigh the risks. If Amcor can stabilize top-line growth and integrate Berry’s operations efficiently, its 2026 EPS accretion target of 12% could materialize, lifting valuation multiples. Until then, the stock’s 3% annual return over the past 12 months may remain constrained by execution concerns.

For now, the verdict hinges on whether cost discipline and merger synergies can offset revenue stagnation—a gamble that could pay off for those willing to bet on Amcor’s long game.