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Avery Dennison Corp. (AVY)

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We are reiterating our Underperform recommendation on Avery Dennison Corp. (AVY) with a target price of $29. The company reported first-quarter 2012 adjusted earnings of $0.45 per share in the first quarter of fiscal 2012. Total revenues dipped 3% to $1.48 billion.

The company is struggling with high raw material costs and low volume. It expects to complete the sale of its Office Product business and instead focus on the more profitable pressure sensitive materials business, Retail Branding and Information Solutions.

Our Underperform recommendation indicates that we expect the stock to perform below the broader market. Our $29 target price or 14.7x our 2012 EPS estimate, reflects this view.

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