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Avery Dennison (AVY) to Report Q4 Earnings: What to Expect?

Zacks Equity Research

Avery Dennison Corporation AVY is scheduled to release fourth-quarter 2018 financial numbers before the opening bell on Jan 30.


In the last reported quarter, Avery Dennison reported an increase of 15% and 5% in earnings and revenues, respectively. While revenues surpassed the Zacks Consensus Estimate, earnings missed the same. However, the company generated average positive surprise of 4.90% over the trailing four quarters.


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


Avery Dennison Corporation Price and EPS Surprise


Avery Dennison Corporation Price and EPS Surprise

Avery Dennison Corporation price-eps-surprise | Avery Dennison Corporation Quote

Key Factors to Consider

The company is likely to witness improved results in the quarter to be reported, backed by acquisitions, organic growth and impressive presence in emerging markets. Further, Avery Dennison’s aggressive cost cutting and restructuring actions, as part of the current optimization program, is likely to lead to higher savings and earnings in the to-be-reported quarter.


The company will also benefit from its faster growing high-value product categories, such as specialty labels, industrial tapes and Radio-frequency identification. However, negative impact of currency translation and raw material price inflation is likely to dent performance. 


Nevertheless, the Zacks Consensus Estimate for earnings per share for the December-end quarter is pegged at $1.50, reflecting year-over-year growth of around 12.8%. The Zacks Consensus Estimate for total sales of $1.78 billion also indicates growth of 2.4% from the prior-year quarter.


The company’s Industrial and Healthcare Materials segment will benefit from the Yongle, Finesse and Mactac acquisitions in the quarter under review. However, continuing softness in the China automotive market will be a deterring factor. The Zacks Consensus Estimate for the segment’s sales is currently pegged at $1804 million for the fourth quarter, projecting year-over-year increase of 1% . The segment’s income is expected to log year-over-year growth of 26% to $17 million.


The Zacks Consensus Estimate for sales for the Label and Graphic Materials segment is at $1,181 million in the October-December quarter, indicating year-over-year growth of 2%. 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, pricing actions to combat raw material inflation will aid results in the to-be-reported quarter. The Zacks Consensus Estimate for the segment’s income is at $145 million, an improvement of 2% over the $142 million reported in the prior-year quarter.


The estimate for the Retail Branding and Information Solutions segment’s sales for the quarter to be reported is $419 million, reflecting year-over-year increase of 6%. The company expects to witness strong engagement among apparel retailers and brands, as well as promising early-stage developments in other end markets. Further, continued momentum in Radio-frequency identification (RFID) sales will be a catalyst for the segment. The Zacks Consensus Estimate for the segment’s income is expected to increase 9% year over year to $51 million.



Avery Dennison’s shares have lost 20.5% in the past year, compared with the industry’s decline of 19%.


Here’s What Our Quantitative Model Predicts


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 $1.45 and the Zacks Consensus Estimate of $1.46, is -3.01%. 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 #4 (Sell), which makes surprise prediction inconclusive.


As it is, 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:


HD Supply Holdings, Inc. HDS has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.


Caterpillar Inc. CAT has an Earnings ESP of 0.30% and a Zacks Rank #2.


Dover Corporation DOV has an Earnings ESP of +0.93% and a Zacks Rank #3.


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