Will Avery Dennison's (AVY) Earnings Streak End in Q4?
Avery Dennison Corporation AVY is scheduled to release fourth-quarter 2015 financial results before the opening bell on Feb 3, 2016. Over the last four trailing quarters, this manufacturer of pressure-sensitive materials has delivered an average positive earnings surprise of 9.10%, surpassing estimates in all of them. Let’s see how things are shaping up prior to this announcement.
Factors at Play
For 2015, Avery Dennison projects adjusted earnings per share in the range of $3.30 and $3.40. This reflects annual growth of 6% to 9% from $3.11 recorded in 2014.
Avery Dennison implemented a restructuring program at the beginning of second-quarter 2015. In connection with this, 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. The increased restructuring costs will hurt earnings.
Avery Dennison expects currency translation to reduce net sales by around 8.5% and pretax earnings by roughly $52 million or $0.37 a share in 2015. Weak market demand in North America continues to be a headwind for the Pressure-Sensitive Materials segment. Moreover, demand in Europe remains soft reflecting economic challenges in the region.
Earnings Whispers?
Our proven model does not conclusively show that Avery will beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Avery’s ESP is -3.85% as the Most Accurate Estimate of 75 cents is lower than the Zacks Consensus Estimate of 78 cents.
Zacks Rank: Avery’s Zacks Rank #4 (Sell) when combined with a negative Earnings ESP makes a surprise prediction unlikely. As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Berry Plastics, Group Inc. BERY has an earnings ESP of +5.13% and a Zacks Rank #3.
Sealed Air Corporation SEE has an earnings ESP of +2.00% and a Zacks Rank #2.
Brady Corp. BRC has an earnings ESP of +13.64% and a Zacks Rank #3.
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SEALED AIR CORP (SEE): Free Stock Analysis Report
AVERY DENNISON (AVY): Free Stock Analysis Report
BRADY CORP CL A (BRC): Free Stock Analysis Report
BERRY PLASTICS (BERY): Free Stock Analysis Report
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