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Avery Dennison (AVY) Hits 52-Week High: What's Driving It?

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Zacks Equity Research
·3 min read
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Shares of Avery Dennison Corporation AVY scaled a fresh 52-week high of $163.82 during the Jan 8 trading session, before retracting to close at $156.75. The ACPO acquisition, pandemic-driven demand for essential categories, cost-control actions as well as the company’s focus on growing its high-value products have contributed to this rally.

Share Price Performance

Shares of the company have gained 19.7% over the past year, as against the industry’s decline of 1.9%.



Notably, Avery Dennison has a trailing four-quarter average earnings surprise of 12.77%.

Driving Factors

The company recently acquired majority assets of Ohio-based ACPO Ltd. for $87.6 million. ACPO is a leading manufacturer of pressure-sensitive overlaminate products for label and flexible packaging markets. The latest buyout will fortify Avery Dennison’s leading position in the core label material segments. Also, ACPO’s complementary overlaminate product will aid the company to expand its product portfolio. ACPO will now become part of Avery Dennison’s Label and Graphic Materials (LGM) segment.

Avery Dennison’s LGM segment serves essential categories that are witnessing higher demand owing to the pandemic. Labelling of non-durable consumer goods like food, beverage, home and personal care products account for around 40% of Avery Dennison’s revenues. The company has been witnessing soaring demand for these products. Also, around 15% of its revenues is tied to logistics and shipping, which will be aided by rise in e-commerce activities.

The LGM segment is also well poised for growth on solid top-line performance and continued margin expansion, volume improvement, focus on high-value categories led by specialty labels, and contributions from productivity initiatives.    

Moreover, the company will benefit from its rapidly-growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID). Continued strength in RFID and external embellishments will boost the Retail Branding and Information Solutions (RBIS) segment. Apart from this, the company’s acquisition of Smartrac’s Transponder (RFID Inlay) Division will generate higher revenues, with RFID business anticipated to be up 15-20% annually over the long term.

Along with its strategic restructuring efforts, Avery Dennison has undertaken temporary cost-containment actions to negate the impact of waning demand in some of the company’s businesses due to the pandemic.

Positive Growth Projections

The Zacks Consensus Estimate for the ongoing year’s earnings per share is currently pegged at $7.35, indicating growth of 6.2% from the prior year.

Zacks Rank & Other Stocks to Consider

Avery Dennison currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the Industrial Products sector include AGCO Corporation AGCO, Crown Holdings, Inc. CCK and Ball Corporation BLL. While AGCO flaunts a Zacks Rank #1 (Strong Buy), Crown Holdings and Ball Corp carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has a long-term earnings growth rate of 13.2%. The stock has appreciated 50.4% in a year’s time.

Crown Holdings has a long-term earnings growth rate of 5%. Shares of the company have gained 37.4% in the past year.

Ball Corp has a long-term earnings growth rate of 5%. Over the past year, the company’s shares have gained 34.2%.

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