Ardagh Metal Packaging Stock: Overlooked 10.2%-Yielder Has 25%+ Upside
January 2, 2024
Why Investors Should Pay More Attention to AMBP Stock
Some industries seem more interesting than others, and that can dictate what kind of attention a particular stock receives.
That might be one of the reasons Ardagh Metal Packaging SA (NYSE:AMBP) has been largely ignored by retail investors. The company produces metal cans for various types of beverages.
But the fact is, container and packaging companies are critical for the global economy. They help protect, transport, market, and preserve products in virtually every sector on the planet. Fast food, beverages, pharmaceuticals, cosmetics—you name it—need packaging and containers.
Roughly 75% of the new products launched in 2020 were in cans. (Source: “Investor Factsheet: Q2 2023,” Ardagh Metal Packaging SA, last accessed December 27, 2023.)
The container and packaging market is forecast to expand by $591.62 billion, or a compound annual growth rate (CAGR) of 8.55%, between 2024 and 2028. (Source: “Container and Packaging Market Analysis APAC, North America, Europe, Middle East and Africa, South America – US, Canada, China, India, UK – Size and Forecast 2024-2028,” Technavio, last accessed December 27, 2023.)
The big growth is expected to come from continued demand from the e-commerce sector, rising demand from the food and beverage industry, increasing demand for sustainable packaging, and solid economic projections.
This trend should provide long-term tailwinds to Ardagh Metal Packaging SA. The Luxembourg-based company supplies cans to Europe, the U.S., and Brazil from its 24 production facilities in nine countries. Its cans are used for beverages including beer, carbonated soft drinks, energy drinks, hard seltzers, juices, pre-mixed cocktails, sparkling waters, teas, and wine
“Robust Performance” in Third Quarter
For the third quarter ended September 30, 2023, Ardagh Metals announced that its revenues increased by 10% year-over-year to $1.29 billion. Its global beverage shipments went up by eight percent year-over-year, driven by growth of 18% in the Americas. (Source: “Ardagh Metal Packaging S.A. – Third Quarter 2023 Results,” Ardagh Metal Packaging SA, October 26, 2023.)
The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew in the third quarter by 22% year-over-year to $171.0 million.
Its net income in the quarter was $17.0 million, or $0.02 per share, down from $68.0 million, or $0.10 per share, in the third quarter of 2022. Its adjusted earnings per share (EPS) in the third quarter of 2023 were consistent with its adjusted EPS in the previous year’s third quarter, at $0.06.
Ardagh Metal Packaging SA’s adjusted operating cash flow in the third quarter of 2023 was $179.0 million, up significantly from $51.0 million in the same period of 2022.
Moreover, its adjusted operating cash flow in the first nine months of 2023 was $185.0 million, compared to a loss of $93.0 million in the first nine months of 2022.
Commenting on the results, Oliver Graham, Ardagh Metal Packaging SA’s CEO, said, “We delivered a robust performance in the quarter to achieve our guidance despite a softening of demand conditions in Europe. [The Americas’] performance was slightly ahead of our expectation[,] with North America benefitting from strong shipment growth, while Brazil was broadly in line.” (Source: Ibid.)
He added, “Our Adjusted operating cashflow generation is significantly improved versus the prior year and underpins our conviction in a strong full year liquidity outturn. Our actions to prudently balance our capacity and optimize our network will also drive future earnings improvement.”
Management Declared Quarterly Dividend of $0.10 Per Share
Ardagh Metal Packaging SA only went public in August 2021 and began paying dividends in 2022, so it doesn’t exactly have a long dividend history. That said, Ardagh Metal Packaging stock started off on the right foot, paying dividends of $0.10 per share for seven quarters.
In December 2023, AMBP stock again paid quarterly cash dividends of $0.10 per share, for a yield of 10.2% (as of this writing). (Source: “Ardagh Metal Packaging S.A. Declares Quarterly Dividend,” Ardagh Metal Packaging SA, October 26, 2023.)
Ardagh Metal Packaging Stock Has 25%+ Upside
AMBP stock’s share price hasn’t, for the most part, fared well since the company went public in 2021. In fact, it was trending downward until late October 2023, when management reported solid third-quarter results and guidance.
Since Ardagh Metal Packaging SA announced its third-quarter results, Ardagh Metal Packaging stock has rallied by an impressive 51.5% (as of this writing).
Despite that big gain, Wall Street analysts are increasingly bullish on AMBP stock. They’ve provided a 12-month average share-price estimate for Ardagh Metal Packaging SA of $4.01 and a high share-price estimate of $5.00. This points to potential gains in the range of 2.4% to 27.7%.
It doesn’t hurt that inflation has been falling, the U.S. Federal Reserve has said it’s done raising its key lending rate, and analysts expect the Fed to begin cutting interest rates in 2024. Analysts also forecast that the U.S. will avoid the long-promised recession, which should boost consumer confidence.
Chart courtesy of StockCharts.com
Admittedly, Wall Street analysts are very conservative and don’t want to be too optimistic. Ardagh Metal Packaging stock, having already broken through one resistance level, could actually rally to $6.00 per share this year. That implies upside potential of 53.5%.
The Lowdown on Ardagh Metal Packaging SA
Ardagh Metal Packaging, the only publicly listed pure-play beverage can producer, has the No. 2 market share in Europe and the No. 3 market share in North America and Brazil. It also holds the No. 2 position globally in the glass industry.
Thanks to industry demand, which is supported by long-term megatrends such as sustainability and innovation, the outlook for Ardagh Metal Packaging SA’s business, share price, and high-yield dividends is robust.
