Avery Dennison (AVY) Q1 Earnings Beat Estimates, Sales Lag
Avery Dennison Corporation AVY delivered adjusted earnings of $1.70 per share in first-quarter 2023, surpassing the Zacks Consensus Estimate of $1.66. The bottom line marked a 29% decline year over year mainly due to the ongoing inventory reductions by the customers.
Including one-time items, the company reported earnings per share (EPS) of $1.49 compared with the year-ago quarter’s $2.39 per share.
Total revenues declined 12% year over year to $2.07 billion, missing the Zacks Consensus Estimate of $2.18 billion mainly due to significant inventory destocking.
The cost of sales in the quarter dipped 11% year over year to $1,523 million. The gross profit declined 15% year over year to $542 million.
Marketing, general and administrative expenses were $334 million compared with the $355 million incurred in the year-ago quarter. The adjusted operating profit was around $208 million compared with the prior-year quarter’s $286 million. The adjusted operating margin was 10.1%, a 210 basis point contraction from 12.2% in the year-ago quarter.
Segment Highlights
Revenues in the Materials Group segment declined 13% year over year to $1,461 million in the reported quarter. On an organic basis, sales were down 9.3%. The segment’s adjusted operating profit fell 20% year on year to $175 million.
Revenues in the Solutions Group were down 11% year over year to $605 million. On an organic basis, sales declined 8.9%. The segment’s adjusted operating income slumped 40% year over year to $55 million.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation price-consensus-eps-surprise-chart | Avery Dennison Corporation Quote
Financial Updates
The company returned $112 million in cash to shareholders through share repurchases and dividend payments in the first quarter of 2023 and also invested $44 million in acquisitions. AVY repurchased 0.3 million shares throughout the quarter.
Avery Dennison ended the quarter with cash and cash equivalents of $351 million compared with $147 million at the end of the prior-year comparable quarter. The company’s long-term debt was $2,911 million at the end of the quarter under review, up from $2,773 million at the end of the first quarter of 2022. The company’s net debt to adjusted EBITDA ratio was 2.5.
AVY realized approximately $9 million in pre-tax savings from restructuring (net of transition costs) in 2022. The company also incurred pre-tax restructuring charges of around $18 million.
Guidance for 2023
Avery Dennison expects adjusted EPS for 2023 in the band of $8.85-$9.20, down from the previously provided guidance of $9.15-$9.55.
Price Performance
Shares of AVY have declined 1.9% in the past year compared with the industry’s 4.9% fall.
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Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW, and OI Glass Inc. OI. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, while OI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Its shares gained 17.3% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 20% in the last year.
The Zacks Consensus Estimate for OI Glass’ 2023 earnings per share is pegged at $2.59 per share. The consensus estimate for 2023 earnings rose 0.8% in the last 60 days. OI has a trailing four-quarter average earnings surprise of 16.5%. Its shares gained 61.6% in the last year.
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