The AMCOR PLC/IDR UNRESTR (ASX: AMC) share price is outperforming the market after it upgraded its profit guidance.

Shares in the global packaging giant jumped 0.7% to $13.82 when the S&P/ASX 200 Index (Index:^AXJO) slumped 1.2% at the time of writing.

You will be hard pressed to find another stock that is lifting its full-year forecast and growing earnings in this coronavirus-stricken market.

Profit growth in challenging market

But Amcor is doing just that as management unveiled its quarterly results. Underlying earnings per share (EPS) jumped 13.7% in constant currency terms to 44.7 US cents in the nine months ended March 31.

Underlying earnings before interest and tax (EBIT) lifted 6.9% to US$1.06 billion even as revenue dipped a modest 1.8% to US$9.33 billion over the period.

Earnings guidance upgrade

The good news didn’t stop there. Amcor increased its FY20 for the second consecutive quarter with management now tipping a 11% to 12% increase in EPS from its previous guidance of 7% to 10%.

While Amcor isn’t immune from the global recession due to the COVID-19 lockdown, its business is deemed by governments as an essential service.

This means its 250 plants around the world have largely continued to operate as Amcor services clients in defensive sectors like healthcare, food and beverages.

Further, the group isn’t reporting an increase in operating costs due to disruptions caused by the pandemic.

Impact of COVID-19

Interestingly, management commented that the impact of COVID-19 on its business is unclear. While some parts of its business have slowed, others have benefitted from the crisis.

For instance, Amcor experienced good demand from healthcare globally and most food and beverage end markets were relatively strong in developed countries.

However, the group experienced weakness in emerging markets, including China and India.

Other quality ASX stocks to watch

Amcor’s integration of its recent acquisition of Bemis is also proceeding well. It’s managed to deliver pre-tax cost savings of US$55 million this financial year and expects to achieve US$180 million by end of FY22.

And unlike many other blue-chip ASX companies, including the big banks like Commonwealth Bank of Australia (ASX: CBA), there is no need to worry about dividend cuts from Amcor.

The group declared a quarterly dividend of 11.5 US cents a share (or 17.7 Australian cents) and said it expected to complete its $500 million on market share buyback by the end of this fiscal year.

Amcor isn’t the only defensive growth stock that’s well placed to outperform in this market. I also rate glove maker Ansell Limited (ASX: ANN) and ship builder Austal Limited (ASX: ASB) very highly.

More reading

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• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning
• Top ASX Dividend Stock Picks for May 2020
• Reality bites: Broker warns CBA shares to underperform this week

Brendon Lau owns shares of Austal Limited, Ansell Limited and Commonwealth Bank of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia has recommended Ansell Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is the Westpac Banking Corp (ASX: WBC) share price a buy for future dividends at the current price?

It seems pretty clear that Westpac is in for a rough time in 2020 with a hefty AUSTRAC penalty coming and all of the coronavirus pain.

The Westpac board wisely decided to defer the interim dividend decision. We don’t know how much pain there’s going to be for banks yet. It could be really painful, or perhaps there will just be some pain but not too much – which is what the banks have already provisioned. Investors just can’t know at this stage. 

In the FY20 half-year result Westpac announced an impairment charge of $2.24 billion, which was up $1.9 billion to take into account the potential impacts of the coronavirus.

That Westpac interim report was hard to read for shareholders. There’s a reason the Westpac share price has fallen so much. Cash earnings were down 70% to $993 million and statutory profit was down 62% to $1.2 billion.

Is the Westpac share price a buy for income?

Clearly there’s no dividend at the moment with it being deferred. However, what about when we get through this stage of the coronavirus? Will the Westpac share price be worth buying then?

If Westpac were to go back to paying $0.80 per share every six months in the future then Westpac would have a grossed-up dividend yield of 15%. But even if you were to assume some positive assumptions, how long would that take? Two years, three?

Not only don’t we know how long the economy will take to get back to normal, we don’t even know if the bank boards will go back to those same dividend payout ratios. Westpac could decide to only pay out half of earnings or even just a third going forwards.

Historically, lot of retirees probably paid less attention to the Westpac share price and more to the dividend. I wouldn’t buy Westpac expecting big dividends in the future, it could easily change to a North American bank level of dividends permanently.

The Westpac share price is a lot lower, but it’s only a buy if the economy can rebound quickly. There may be a lot more pain to come, I’m not looking to buy today. I think there are better dividend shares out there.

More reading

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• ASX 200 storms 1.2% higher: Cochlear reports 60% sales decline, Webjet jumps 22%
• How Macquarie Group is vying to unseat CBA
• ASX 200 Weekly Wrap: New ASX bull run continues
• 3 top ASX dividend shares to buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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