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Avery Dennison (AVY) Q3 Earnings Miss, Sales Top Estimates
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Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.45 per share in third-quarter 2018, which increased around 15% year over year. Earnings, however, missed the Zacks Consensus Estimate by a penny.
Including one-time items, the company’s earnings surged 41% to $1.69 per share from $1.20 per share recorded in the year-ago quarter.
Total revenues jumped around 5% to $1.76 billion from $1.68 billion recorded in the year-earlier quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $1.74 billion.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Cost of sales in the quarter went up 6% year over year to $1.30 billion. Gross profit increased around 1.7% year over year to $459 million, while gross margin contracted 80 basis points (bps) to 26.1%.
Marketing, general and administrative expenses came in at $271 million compared with $274 million reported in the year-ago quarter. Adjusted operating profit advanced 6% year over year to $189 million. Adjusted operating margin expanded 10 bps on a year-over-year basis to 10.7%.
Segmental Performance
Revenues from the Label and Graphic Materials segment climbed around 5% year over year to $1,194 million. On an organic basis, sales grew around 6%. Adjusted operating profit declined 2.5% to $147 million from the prior-year quarter.
Revenues from the Retail Branding and Information Solutions segment went up 7% to $398 million, from $374 million recorded in the year-ago quarter. On an organic basis, sales were up 8%. The segment’s adjusted operating income improved around 36% to $45 million.
The Industrial and Healthcare Materials segment reported net sales of $167 million, edging down 0.8% from $ the prior-year quarter. The segment reported adjusted operating income of $15 million compared with $14 million recorded in the year-ago quarter.
Financial Updates
Avery Dennison had cash and cash equivalents of $218 million at the end of the third quarter, up from $232 million reported at the end of the prior-year quarter. The company generated $188 million in cash from operating activities for the nine-month period ended Sep 29, 2018, compared with $390 million recorded in the comparable period last year.
Avery Dennison’s long-term debt decreased to $1,295 million as of Sep 29, 2018, compared with $1,298 million as of Sep 30, 2017.
During the reported quarter, Avery Dennison repurchased 0.7 million shares for a total cost of $72 million. Year to date, the company returned $306 million in cash to shareholders through a combination of share repurchases and dividends, up from $221 million for the comparable period last year.
Cost-Reduction Activities
Avery Dennison realized approximately $6 million in pre-tax savings from restructuring in the Jul-Sep quarter. The company recognized a net benefit in pretax restructuring charges of $6.4 million.
U.S. Pension Plan Termination
Avery Dennison has begun the termination process of the Avery Dennison Pension Plan — a tax-qualified U.S. defined benefit plan. The company contributed $200 million to the plan during the third quarter using commercial paper borrowings. It expects to contribute an additional estimated $30 million during 2019, to fully fund the plan and complete the transaction.
After-tax impact of actions associated with the termination will impact reported earnings per share by 50-70 cents in 2018, and an additional $4.25-$4.45 during 2019, reflecting estimated total pre-tax settlement charges in the range of $575-$600 million.
Guidance
For 2018, Avery Dennison maintained its adjusted earnings per share guidance of $5.95-$6.10.
Share Price Performance
Over the past year, Avery Dennison has outperformed its industry with respect to price performance. The stock has lost 2%, while the industry has recorded loss of around 5%.
Zacks Rank & Key Picks
Avery Dennison currently carries a Zacks Rank #4 (Sell).
Atkore International has a long-term earnings growth rate of 10%. The stock has gained 15% in a year’s time.
Donaldson Company has a long-term earnings growth rate of 11.5%. Its shares have rallied 11% in the past year.
Enersys has a long-term earnings growth rate of 10%. The company’s shares have been up 15% over the past year.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Avery Dennison (AVY) Q3 Earnings Miss, Sales Top Estimates
Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.45 per share in third-quarter 2018, which increased around 15% year over year. Earnings, however, missed the Zacks Consensus Estimate by a penny.
Including one-time items, the company’s earnings surged 41% to $1.69 per share from $1.20 per share recorded in the year-ago quarter.
Total revenues jumped around 5% to $1.76 billion from $1.68 billion recorded in the year-earlier quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $1.74 billion.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation Price, Consensus and EPS Surprise | Avery Dennison Corporation Quote
Cost of sales in the quarter went up 6% year over year to $1.30 billion. Gross profit increased around 1.7% year over year to $459 million, while gross margin contracted 80 basis points (bps) to 26.1%.
Marketing, general and administrative expenses came in at $271 million compared with $274 million reported in the year-ago quarter. Adjusted operating profit advanced 6% year over year to $189 million. Adjusted operating margin expanded 10 bps on a year-over-year basis to 10.7%.
Segmental Performance
Revenues from the Label and Graphic Materials segment climbed around 5% year over year to $1,194 million. On an organic basis, sales grew around 6%. Adjusted operating profit declined 2.5% to $147 million from the prior-year quarter.
Revenues from the Retail Branding and Information Solutions segment went up 7% to $398 million, from $374 million recorded in the year-ago quarter. On an organic basis, sales were up 8%. The segment’s adjusted operating income improved around 36% to $45 million.
The Industrial and Healthcare Materials segment reported net sales of $167 million, edging down 0.8% from $ the prior-year quarter. The segment reported adjusted operating income of $15 million compared with $14 million recorded in the year-ago quarter.
Financial Updates
Avery Dennison had cash and cash equivalents of $218 million at the end of the third quarter, up from $232 million reported at the end of the prior-year quarter. The company generated $188 million in cash from operating activities for the nine-month period ended Sep 29, 2018, compared with $390 million recorded in the comparable period last year.
Avery Dennison’s long-term debt decreased to $1,295 million as of Sep 29, 2018, compared with $1,298 million as of Sep 30, 2017.
During the reported quarter, Avery Dennison repurchased 0.7 million shares for a total cost of $72 million. Year to date, the company returned $306 million in cash to shareholders through a combination of share repurchases and dividends, up from $221 million for the comparable period last year.
Cost-Reduction Activities
Avery Dennison realized approximately $6 million in pre-tax savings from restructuring in the Jul-Sep quarter. The company recognized a net benefit in pretax restructuring charges of $6.4 million.
U.S. Pension Plan Termination
Avery Dennison has begun the termination process of the Avery Dennison Pension Plan — a tax-qualified U.S. defined benefit plan. The company contributed $200 million to the plan during the third quarter using commercial paper borrowings. It expects to contribute an additional estimated $30 million during 2019, to fully fund the plan and complete the transaction.
After-tax impact of actions associated with the termination will impact reported earnings per share by 50-70 cents in 2018, and an additional $4.25-$4.45 during 2019, reflecting estimated total pre-tax settlement charges in the range of $575-$600 million.
Guidance
For 2018, Avery Dennison maintained its adjusted earnings per share guidance of $5.95-$6.10.
Share Price Performance
Over the past year, Avery Dennison has outperformed its industry with respect to price performance. The stock has lost 2%, while the industry has recorded loss of around 5%.
Zacks Rank & Key Picks
Avery Dennison currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the same sector include Atkore International Group Inc. (ATKR - Free Report) , Donaldson Company, Inc. (DCI - Free Report) and Enersys (ENS - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atkore International has a long-term earnings growth rate of 10%. The stock has gained 15% in a year’s time.
Donaldson Company has a long-term earnings growth rate of 11.5%. Its shares have rallied 11% in the past year.
Enersys has a long-term earnings growth rate of 10%. The company’s shares have been up 15% over the past year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>