There's a good chance you are not familiar with Amcor or the company it merged with last year, Evansville, Indiana-based Berry Global. Largely because the company is not really a "story stock." It's a cash-flow, scale and execution story. Amcor is a consumer and healthcare product packaging company. When's the last time you wondered what company makes the bag your dog food comes in? Or the label on your energy drink bottle? Packaging is a resilient end market: the industry benefits from scale, which the newly-merged company has. If Amcor could simply return profit margins to their level of three years ago, that would translate into more than $1.85 billion in net income from the approximately $23 billion in revenue the merged company is expected to generate over the next twelve months. AMCR is trading at less than 13x that number now. Positioned for savings Amcor, domiciled in Switzerland but traded on the New York Stock Exchange, completed its all-stock combination with Berry Global, effective last April, creating a broad portfolio across consumer and healthcare packaging and positioning it to realize high cost and operating synergies. Management has guided to $4.00-$4.15 in adjusted earnings per share for FY2026 and free cash flow of $1.8-$1.9 billion. Bearing in mind that corporate integration post-merger tends to be thornier than most merger and acquisitions bankers are willing to admit, assuming capex remains in line, $2 billion in free cash flow may be achievable by calendar year 2027. While packaging demand is steadier than many industrial end markets, it's not immune to volume softness, which can compress operating leverage precisely when you're trying to pay down debt, and Amcor does have relatively high debt, about $15 billion, or 4x the anticipated $3.7-$4 billion in earnings before interest, taxes, depreciation and amortization (EBITDA). Although the company has indicated an intention to reduce its debt levels and its credit ratings are investment-grade, a net debt-to-EBITDA ratio of 3x or better would provide additional flexibility, particularly given the company's relatively rich dividend (current yield is 5.24%). Dividends, all else being equal, will increase the value of puts and decrease the value of call options. This makes sense because, again, all else equal, a stock price falls by the amount of the dividend on the ex-dividend date. If it did not, it would create an arbitrage. This is readily apparent when one compares the price of the April $50 calls to the April $48 puts. As I write this, they are comparably priced, but the puts are slightly out of the money, whereas the calls are effectively at the money. Selling cash-secured puts For traders interested in a long position, one way to work one's way in is to sell cash-secured puts, such as the April 47s. These have a delta of less than 30, a probability of profit of nearly 80%, and a standstill yield of approximately 2.13% per annum, assuming one sold those puts at $1.00. In the worst case, one would own the stock at $46/share, a discount of slightly more than 7% of the current stock price. In an era with AI-propelled mania, 13% annualized may not seem super exciting. Perhaps not, but neither are trays that hold ground turkey on the shelf at the supermarket, but it's a business. In this case, one that brings in more than $20 billion/year in revenue. DISCLOSURES None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
