-- Amcor (ASX:AMC) has had its earnings estimates cut by Jefferies for the second time in a month, as higher resin costs and softer consumer demand weigh on margins and cash flow, the firm said in a Thursday note.
Jefferies noted resin costs rose around 15% to 25% year on year, with the company's polyethylene and polypropylene input exposure at $5 billion to $6 billion annually, and expects the delayed impact of higher costs to pass through in coming quarters, resulting in a notable margin squeeze in the fourth quarter.
The firm expects fiscal 2026 earnings of about $3.94, below both company guidance of $4 to $4.15 and consensus at $4, and has cut fiscal 2027 estimates by around 4% on a more cautious view of demand and margins.
The firm highlighted working capital pressure, with an estimated $200 million drag from higher resin costs pushing fiscal 2026 leverage to around 3.5 times, and noted that a further 10% rise in resin prices could add around 0.4 times to leverage if fully passed through working capital.
The firm expects third quarter earnings before interest, taxes, depreciation and amortization of $936 million, in line with consensus, and earnings of $0.927, slightly below estimates due to higher interest costs, alongside low-single-digit volume declines and continued softness in food and household.
Jefferies kept a buy rating on Amcor and cut its price target to AU$71.83 from AU$75.27.