Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.01 per share in third-quarter 2016, which surged 16% from 87 cents earned in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate by a penny, a positive surprise of 1%.
Including restructuring costs and other items, earnings from continuing operations were 98 cents per share in the quarter, compared with 87 cents in the year-ago quarter.
Total revenue edged up 2.8% to $1,509 million from $1,468 million in the prior-year quarter. Moreover, revenues came above the Zacks Consensus Estimate of $1,503 million. On an organic basis, sales were up 3% year over year.
Cost of sales in the reported quarter went up 2.7% year over year to $1,091 million. Gross profit increased around 2.9% to $417.6 million, with gross margin expanding 10 basis points (bps) to 27.7%.
Marketing, general and administrative expenses were $270.3 million compared with $268.1 million in the year-ago quarter. Adjusted operating profit advanced 7% year over year to $147.3 million. Adjusted operating margin improved 40 bps on a year-over-year basis to 9.8%.
Segmental Performance
Revenues from the Pressure-sensitive Materials segment went up 4% to $1,124 million. On an organic basis, sales grew 3%. Adjusted operating profit expanded 7% to $141.4 million from $131.6 million in the year-ago quarter.
Revenues from the Retail Branding and Information Solutions segment edged up 1% to $371 million from $367 million in the year-earlier quarter. Organic sales increased 2%. The segment’s adjusted operating income improved 3% to $29.9 million.
The Vancive Medical Technologies segment reported net sales of $14 million, slumping 20% from $17.6 million in the year-ago quarter. The segment reported adjusted operating loss of $0.5 million against an operating profit of $0.5 million a year ago.
Financial Updates
Avery Dennison had cash and cash equivalents of $189 million at the end of third-quarter 2016 compared with $143.8 million at the end of third-quarter 2015. Cash flow from operations came in at $365.7 million for the nine-month period ended Oct 1, 2016 compared with $282.2 million in the comparable year-ago period.
At quarter end, Avery Dennison’s long-term debt decreased to $713 million from $963.9 million as of Oct 3, 2015.
During the first nine months of 2016, Avery Dennison repurchased 2.7 million shares for a total cost of $182 million. The company reduced its share count by 1.0 million. The cost of repurchases, net of proceeds from stock option exercises stands at $118 million.
Cost Reduction Activities
In the third quarter, Avery Dennison realized approximately $21 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $3 million.
Guidance
For 2016, Avery Dennison raised its adjusted earnings per share guidance to $3.95–$4.00 from the previous range of $3.80–$3.95, reflecting a lower tax rate. Including one-time items, earnings are projected in the band of $3.50–$3.55 per share.
The company remains confident that the consistent execution of strategies will facilitate long-term goals for superior value creation through a balance of profitable growth and capital discipline.
AVERY DENNISON Price, Consensus and EPS Surprise
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Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.01 per share in third-quarter 2016, which surged 16% from 87 cents earned in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate by a penny, a positive surprise of 1%.
Including restructuring costs and other items, earnings from continuing operations were 98 cents per share in the quarter, compared with 87 cents in the year-ago quarter.
Total revenue edged up 2.8% to $1,509 million from $1,468 million in the prior-year quarter. Moreover, revenues came above the Zacks Consensus Estimate of $1,503 million. On an organic basis, sales were up 3% year over year.
Cost of sales in the reported quarter went up 2.7% year over year to $1,091 million. Gross profit increased around 2.9% to $417.6 million, with gross margin expanding 10 basis points (bps) to 27.7%.
Marketing, general and administrative expenses were $270.3 million compared with $268.1 million in the year-ago quarter. Adjusted operating profit advanced 7% year over year to $147.3 million. Adjusted operating margin improved 40 bps on a year-over-year basis to 9.8%.
Segmental Performance
Revenues from the Pressure-sensitive Materials segment went up 4% to $1,124 million. On an organic basis, sales grew 3%. Adjusted operating profit expanded 7% to $141.4 million from $131.6 million in the year-ago quarter.
Revenues from the Retail Branding and Information Solutions segment edged up 1% to $371 million from $367 million in the year-earlier quarter. Organic sales increased 2%. The segment’s adjusted operating income improved 3% to $29.9 million.
The Vancive Medical Technologies segment reported net sales of $14 million, slumping 20% from $17.6 million in the year-ago quarter. The segment reported adjusted operating loss of $0.5 million against an operating profit of $0.5 million a year ago.
Financial Updates
Avery Dennison had cash and cash equivalents of $189 million at the end of third-quarter 2016 compared with $143.8 million at the end of third-quarter 2015. Cash flow from operations came in at $365.7 million for the nine-month period ended Oct 1, 2016 compared with $282.2 million in the comparable year-ago period.
At quarter end, Avery Dennison’s long-term debt decreased to $713 million from $963.9 million as of Oct 3, 2015.
During the first nine months of 2016, Avery Dennison repurchased 2.7 million shares for a total cost of $182 million. The company reduced its share count by 1.0 million. The cost of repurchases, net of proceeds from stock option exercises stands at $118 million.
Cost Reduction Activities
In the third quarter, Avery Dennison realized approximately $21 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $3 million.
Guidance
For 2016, Avery Dennison raised its adjusted earnings per share guidance to $3.95–$4.00 from the previous range of $3.80–$3.95, reflecting a lower tax rate. Including one-time items, earnings are projected in the band of $3.50–$3.55 per share.
The company remains confident that the consistent execution of strategies will facilitate long-term goals for superior value creation through a balance of profitable growth and capital discipline.
AVERY DENNISON Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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