The Amcor Limited (ASX: AMC) share price rallied as the global packing giant's latest earnings results were better received by the market than its last profit announcement.
The AMC share price jumped 1.2% to a six-month high of $14.46 in morning trade and outperformed its peers with the Pact Group Holdings Ltd (ASX: PGH) share price tumbling 0.5% to $3.92 and the Orora Ltd (ASX: ORA) gaining a modest 0.6% to $3.15.
In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index slipped 0.2% into the red at the time of writing as bank stocks weighed down the market.
Glass half full
But investors were feeling upbeat towards Amcor even though the company's results were far from perfect.
Amcor posted a 2.4% increase in interim profit before interest and tax (PBIT) to US$509.6 million and a 3.4% improvement to its net profit to US$328.5 million. The figures are broadly inline with consensus forecast, if not a tat softer.
The group's non-US dollar earnings were hurt by the rising US dollar, but that benefited its dividend payment to Australian shareholders with the Amcor declaring a first half dividend of 29.78 cents per share, or 13.8% higher than the same time last year, even though the dividend only increased US0.5 cents to US$0.215.
The group's Flexibles division dragged on its performance but the issues plaguing that part of the business is well understood.
Investors are also willing to take a "glass-half-full" look at the results as management issued an encouraging outlook for the second half of the current financial year.
Promising outlook
Amcor said it still expected "solid PBIT growth" for the Flexibles segment. This assumes an easing in cost inflation, modest organic growth, a net circa US$10 million contribution from recent acquisitions and a similar dollar gain from its restructuring program.
Its smaller Rigid Plastics business performed better in the six months to end December even though its Argentinian operations suffered from the economic meltdown in that nation.
Fortunately, that isn't enough to stop the division from posted a 5.6% PBIT increase in constant currency terms to US$148.9 million.
Management is also expecting solid underlaying PBIT growth for the Rigid division in 2HFY19 that is driven by modest organic growth, recent acquisitions and cost savings from restructuring.
Amcor has also reassured investors that its acquisition of US-based rival Bemis is on track to be completed by the June quarter of this calendar year.
I have a favourable view on the stock as I believe it offers good leverage to the US market (which is still growing faster than other developed economies), relatively defensive earnings streams and attractive valuation for its expected growth profile.
