U.S. Markets closed

Avery Dennison (AVY) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Avery Dennison Corporation AVY is scheduled to report first-quarter 2019 financial numbers before the opening bell on Apr 24.
In the last reported quarter, Avery Dennison reported an increase of 14% and 2% in earnings and revenues, respectively. While earnings surpassed the Zacks Consensus Estimate, revenues missed the same.

The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering average positive surprise of 3.63%.

Avery Dennison’s shares have appreciated 5.5% in the past year, outperforming the industry’s growth of 0.1%.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

The company is likely to witness improved results in the quarter to be reported, backed by acquisitions, organic growth and solid presence in emerging markets. Further, Avery Dennison’s pricing actions to combat raw-material inflation, restructuring activities and execution of strategies will likely result in higher savings and earnings in the quarter.
The Zacks Consensus Estimate for the Mar-end quarter’s earnings per share is pegged at $1.46, reflecting year-over-year growth of around 1.4%. The Zacks Consensus Estimate for total sales of $1.75 billion represents year-over-year decline of 1.3%.

The company’s Industrial and Healthcare Materials (IHM) segment will benefit from the Yongle, Finesse and Mactac acquisitions in the quarter under review. However, prevailing softness in the China automotive market will be a deterring factor. The Zacks Consensus Estimate for the segment’s first-quarter sales is projected to be down 3% year over year to $167 million. The segment’s income is expected to be up 10.7% year on year to $14.4 million.
The Zacks Consensus Estimate for the Label and Graphic Materials (LGM) segment’s sales is $1,198 million, indicating year-over-year contraction of 1.6%. The segment’s performance will be aided by growth in emerging markets, focus on high-value categories (including specialty labels), as well as contributions from productivity initiatives. Further, restructuring actions associated with the consolidation of the European footprint of its LGM segment will drive returns for the segment in the soon-to-be-reported quarter. The Zacks Consensus Estimate for the segment’s income is $156 million, marking a 4% improvement from the $150 million reported in the prior-year quarter.
The Zacks Consensus Estimate for the Retail Branding and Information Solutions segment’s first-quarter sales is $388 million — reflecting marginal improvement from the prior-year quarter's $386 million. The Zacks Consensus Estimate for the segment’s income is projected to increase 21.8% year over year to $42.2 million. Further, Avery Dennison will benefit from its faster growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID). The company expects RFID to deliver annual growth of more than 15-20% which have a positive impact.

Nonetheless, Avery Dennison has begun the termination process of the Avery Dennison Pension Plan — a tax-qualified U.S. defined benefit plan. The company expects to contribute an additional $50-$60 million during 2019, to fully fund the plan and complete the transaction. The completion of plan termination might affect earnings per share by around $3.55 in the first quarter. In addition, unfavorable foreign currency-translation impact will affect Avery Dennison’s performance in the quarter.

Avery Dennison Corporation Price and EPS Surprise

Avery Dennison Corporation Price and EPS Surprise | Avery Dennison Corporation Quote

Earnings Whispers
Our proven model does not show that Avery Dennison is likely to beat earnings estimates this quarter. 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. That is not the case here as you will see below.
Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate of $1.42 and the Zacks Consensus Estimate of $1.46, is -2.74%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Avery Dennison currently carries a Zacks Rank #3 (Hold).
It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Valmont Industries, Inc. VMI has an Earnings ESP of +11.60% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise, Inc. AAXN has an Earnings ESP of +6.99% and carries a Zacks Rank #3, currently.

Rockwell Automation, Inc. ROK has an Earnings ESP of +1.13% and carries a Zacks Rank #3, at present.

Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>

Is your investment advisor fumbling your financial future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.” Click to get your free report.
Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report
Avery Dennison Corporation (AVY) : Free Stock Analysis Report
Valmont Industries, Inc. (VMI) : Free Stock Analysis Report
Axon Enterprise, Inc (AAXN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research