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What's in the Cards for Avery Dennison's (AVY) Q1 Earnings?

Zacks Equity Research
·5 min read

Avery Dennison Corporation AVY is scheduled to report first-quarter 2020 results before the opening bell on Apr 29.

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for the March-end quarter’s earnings per share is pegged at $1.50, indicating year-over-year growth of 1.4%. The Zacks Consensus Estimate for total sales of $1.72 billion suggests a year-over-year decline of 12.1%.

A Sneak Peek into Q4 Performance

In the last reported quarter, Avery Dennison’s earnings beat the Zacks Consensus Estimate, while sales missed the same. Both top- and bottom-line figures improved year over year. The company outpaced estimates in all of the trailing four quarters, the average positive beat being 2.62%.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

The company is likely to have benefited from acquisitions and growth in high-value product categories during the January-March period. Further, Avery Dennison’s cost-reduction initiatives and restructuring activities are anticipated to have significantly boosted savings, in turn, bolstering earnings during this period. However, rising transition costs related with the European restructuring might have impacted margins in the first quarter.

The company is specialized in designing and manufacturing a wide variety of labeling and functional materials. Hence, a overall slowdown in the U.S manufacturing sector and a slump in industrial production primarily due to the coronavirus pandemic might have thwarted end-market demand for its products.

The Zacks Consensus Estimate for the Industrial and Healthcare Materials (IHM) segment’s quarterly sales is pinned at $162 million, projecting a year-on-year fall of 1.2%. The segment’s adjusted income is estimated to be up 12%, year on year, to $15 million. The segment continues to drive commercial execution, while also benefiting from the Yongle, Finesse and Mactac acquisitions.

The Zacks Consensus Estimate for the Label and Graphic Materials (LGM) segment’s sales is pinned at $1,177 million for the quarter, calling for a year-over-year decline of 0.08%. The segment continues to benefit from growth in emerging markets, focus on high-value categories led by specialty labels, as well as contributions from productivity initiatives. These factors are anticipated to have been conducive to the company’s top-line growth and margins during the first quarter. Furthermore, Avery Dennison’s completion of restructuring actions associated with the consolidation of the European footprint of its LGM segment are likely to have resulted in higher returns for the segment during the period under consideration. The Zacks Consensus Estimate for the segment’s adjusted income is $150 million, indicating year-over-year growth of 7.1%.

The Zacks Consensus Estimate for the Retail Branding and Information Solutions segment’s first-quarter sales is pinned at $408 million, suggesting a 2.5% improvement from the prior-year quarter's $398 million. The Zacks Consensus Estimate for the segment’s adjusted income is pegged at $51 million, flat year over year. Continued strength in faster-growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID), is likely to have bolstered the segment’s top-line growth.

Avery Dennison Corporation Price and EPS Surprise

Avery Dennison Corporation Price and EPS Surprise
Avery Dennison Corporation Price and EPS Surprise

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

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Avery Dennison this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Avery Dennison is -0.75%. This is because currently the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.49 per share and $1.50 respectively.

Zacks Rank: Avery Dennison currently carries a Zacks Rank of 3.

Share Price Performance

Avery Dennison’s shares have declined 1.6% in the past year compared with the industry’s loss of 21.6%.

Stocks Poised to Beat Earnings Estimates

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Axon Enterprise, Inc. AAXN has an Earnings ESP of +2.13% and carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lawson Products, Inc. LAWS currently carries a Zacks Rank #3 and has an Earnings ESP of +3.85%.

Ball Corporation BLL, another Zacks #3 Ranked stock, has an Earnings ESP of +1.56%.

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