Shares of Avery Dennison Corporation (AVY) reached a new 52-week high of $50.88 on Dec 27, surpassing the previous high of $49.97. The company’s shares closed at $50.48 at the end of trading on Dec 27, with a solid one-year return of about 48.5% and year-to-date return of 48%, outperforming the S&P 500.
This Pasadena, CA-based pressure-sensitive materials producer has delivered positive earnings surprises over the past four quarters with an average surprise of 5.69%. Avery has a market cap of $4.9 billion and a long-term expected earnings growth of 21.7%. Average volume of shares traded over the last three months is approximately 735K.
What’s Driving Avery Up?
On Oct 25, Avery reported adjusted earnings of 69 cents per share in the third quarter of 2013, up 35% year over year and ahead of the Zacks Consensus Estimate of 65 cents. Results benefited from the growth in revenues in the core segments as well as Avery’s restructuring and other productivity actions that were initiated last year.
For 2013, Avery raised its adjusted earnings forecast to the range of $2.60 to $2.70 per share from the previous range of $2.40 to $2.60. The revised guidance reflects annual growth of 33% to 38%.
Avery has aggressively implemented a restructuring program to reduce costs across all business segments. The program is anticipated to be completed by mid 2013. Avery expects to save more than $100 million annually by mid-2013, through leveraging this program.
In addition, Avery remains committed to its long-term targets (by 2015) of sales growth in the range of 3% to 5% and net income growth of 10–15%. Earnings per share growth of 15–20% is expected from continued expansion in emerging markets and productivity improvements.
Moreover, with the divestiture of the underperforming Office and Consumer Products unit, Avery Dennison will be able to focus on its core segments and augment its growth profile. Further share repurchases is also expected to boost Avery’s earnings.
Avery currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked stocks in the same industry are Hypermarcas S.A. (HYPMY), Nutrisystem, Inc. (NTRI) and Pitney Bowes Inc. (PBI). All these stocks hold a Zacks Rank #2 (Buy).