Avery Dennison Scales 52-Week High on Strong Q3 Results
Shares of Avery Dennison Corporation AVY scaled a new 52-week high of $66.65 on Nov 20 and eventually closed a notch lower at $65.95. The stock price appreciation came on the back of strong third-quarter results.
This Pasadena, CA-based manufacturer of pressure-sensitive materials has a market cap of $6 billion. Meanwhile, average volume of shares traded over the last three months is approximately 778K. The company has outperformed the Zacks Consensus Estimate in all of the trailing four quarters with an average positive surprise of 9.10%.
Strengths of Avery Dennison
Shares of Avery started trending upward since the company reported third-quarter 2015 results on Oct 29, wherein adjusted earnings improved 13% year over year to 87 cents per share despite a 6% dip in revenues. On an organic basis, sales grew 5% year on year. For 2015, Avery Dennison expects earnings per share in the range of $3.30 to $3.40. Compared to adjusted earnings of $3.11 in 2014, this reflects annual growth of 6% to 9%.
In the third quarter, Avery Dennison realized approximately $21 million in savings from restructuring. The company incurred restructuring charges of approximately $7 million.
Avery Dennison now expects to realize more than $70 million in pre-tax savings in 2015 from restructuring (net of transition costs). The company will incur pre-tax restructuring charges of approximately $65 million, most of which will represent cash costs, reflecting a $10 million increase from its prior guidance. The increase is due to further cost reduction actions planned as part of the business model transformation underway within Retail Branding and Information Solutions (RBIS) segment.
Avery Dennison’s new strategy for RBIS is focused on accelerating growth through a more regionally-driven business model that is more competitive, faster, and less complex. The company is implementing a multi-year plan to streamline decision-making and eliminate management layers, while further consolidating its manufacturing footprint, to reduce costs across the global organization.
For 2016, Avery Dennison projects pre-tax savings (net of transition costs) of approximately $60 million from restructuring actions within RBIS. The execution of these actions will allow the business to be more competitive in the less differentiated segments of the market, which will help achieve RBIS’ financial targets, including an operating margin of 10% to 11% by 2018.
At present, Avery carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks worth considering in the same sector are Advanced Emissions Solutions, Inc. ADES, Belden Inc. BDC and Cintas Corporation CTAS. All the three stocks hold a Zacks Rank #2 (Buy).
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