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Avery Dennison Corporation (AVY - Free Report) reported second-quarter 2020 adjusted earnings of $1.27 per share, surpassing the Zacks Consensus Estimate of $1.12. However, the figure declined 26% year over year.
Including one-time items, the company reported net income of 95 cents per share compared with $1.69 per share in the year-ago quarter.
Total revenues declined 15% year over year to $1,529 million. Nevertheless, the top line beat the Zacks Consensus Estimate of $1,512 million. Sales declined 13.7% on an organic basis.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Cost of sales in the quarter declined 13% year over year to $1,146 million. Gross profit slumped 21% year over year to $383 million. Gross margin contracted 180 basis points year over year to 25.1% in the second quarter.
Marketing, general and administrative expenses were $219 million compared with the $266 million incurred in the year-ago quarter. Adjusted operating profit amounted to $164 million, down from the $217 million in the prior-year quarter. Adjusted operating margin was 10.7% in the quarter, down from the prior-year quarter’s 12.1%.
Segment Highlights
Revenues in the Label and Graphic Materials (LGM) segment declined 9% year over year to $1,102 million. On an organic basis, sales were down 4.9%. Adjusted operating profit dipped 2% year on year to $163 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment plunged 30% year over year to $295 million. On an organic basis, sales were down 35.5% hurt by site closures and lower apparel demand. The segment’s adjusted operating income tanked 96% year over year to $2.2 million.
Net sales in the Industrial and Healthcare Materials (IHM) segment amounted to $132 million, down 23% from $171 million reported in the prior-year quarter. On an organic basis, sales were down 20.9% on decline in industrial categories driven by automotive. .The segment reported adjusted operating income of $9 million compared with the prior-year quarter’s $17.9 million.
Financial Updates
Free cash flow in the first half of 2020 for the company was $109 million, down 34% from the prior year comparable period. Avery Dennison had cash and cash equivalents of around $262.6 million as of Jun 27, 2020, up from $247 million as of Jun 29, 2019. As of Jun 30, 2020, the net debt to adjusted EBITDA ratio was 2.1 as of the end of the second quarter, below the company’s long-term target of 2.3-2.6. Avery Dennison currently has $800 million available under its revolving credit facility, and approximately $260 million in cash and cash equivalents on hand at quarter-end.
The company has initiated cost control and cash management actions to negate weak demand in few of its businesses, and is aimimg to deliver free cash flow of approximately $500 million in 2020.
Cost-Reduction Activities
Avery Dennison realized $15 million in pre-tax savings from restructuring in the second quarter. The company anticipates incremental savings from restructuring actions of $60-$70 million during 2020. Carryover savings, net of transition costs, of approximately $70 million is projected for 2021. On top of this, the company is targeting net temporary savings of approximately $150 million in 2020, over half of which has been realized in the first half of the year.
Guidance
Avery Dennison expects sales and earnings to fall in 2020 on lower demand. In the third quarter, the company anticipates a decline in sales of 5-7%, before the impact of currency translation. Organic sales is expected to decline 7-9% in the quarter.
Price Performance
Shares of Avery Dennison have gained 3.4% in the past year, against the industry’s decline of 20.0%.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Lakeland Industries has a projected earnings growth rate of 418% for the current fiscal year. The company’s shares have appreciated 111% in the past year.
IIVI Incorporated has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have gained 10% in the past year.
Silgan has an expected earnings growth rate of 28.7% for 2020. The stock has surged 23% in a year’s time.
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Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Avery Dennison (AVY) Q2 Earnings & Revenues Beat Estimates
Avery Dennison Corporation (AVY - Free Report) reported second-quarter 2020 adjusted earnings of $1.27 per share, surpassing the Zacks Consensus Estimate of $1.12. However, the figure declined 26% year over year.
Including one-time items, the company reported net income of 95 cents per share compared with $1.69 per share in the year-ago quarter.
Total revenues declined 15% year over year to $1,529 million. Nevertheless, the top line beat the Zacks Consensus Estimate of $1,512 million. Sales declined 13.7% on an organic basis.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation price-consensus-eps-surprise-chart | Avery Dennison Corporation Quote
Cost of sales in the quarter declined 13% year over year to $1,146 million. Gross profit slumped 21% year over year to $383 million. Gross margin contracted 180 basis points year over year to 25.1% in the second quarter.
Marketing, general and administrative expenses were $219 million compared with the $266 million incurred in the year-ago quarter. Adjusted operating profit amounted to $164 million, down from the $217 million in the prior-year quarter. Adjusted operating margin was 10.7% in the quarter, down from the prior-year quarter’s 12.1%.
Segment Highlights
Revenues in the Label and Graphic Materials (LGM) segment declined 9% year over year to $1,102 million. On an organic basis, sales were down 4.9%. Adjusted operating profit dipped 2% year on year to $163 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment plunged 30% year over year to $295 million. On an organic basis, sales were down 35.5% hurt by site closures and lower apparel demand. The segment’s adjusted operating income tanked 96% year over year to $2.2 million.
Net sales in the Industrial and Healthcare Materials (IHM) segment amounted to $132 million, down 23% from $171 million reported in the prior-year quarter. On an organic basis, sales were down 20.9% on decline in industrial categories driven by automotive. .The segment reported adjusted operating income of $9 million compared with the prior-year quarter’s $17.9 million.
Financial Updates
Free cash flow in the first half of 2020 for the company was $109 million, down 34% from the prior year comparable period. Avery Dennison had cash and cash equivalents of around $262.6 million as of Jun 27, 2020, up from $247 million as of Jun 29, 2019. As of Jun 30, 2020, the net debt to adjusted EBITDA ratio was 2.1 as of the end of the second quarter, below the company’s long-term target of 2.3-2.6. Avery Dennison currently has $800 million available under its revolving credit facility, and approximately $260 million in cash and cash equivalents on hand at quarter-end.
The company has initiated cost control and cash management actions to negate weak demand in few of its businesses, and is aimimg to deliver free cash flow of approximately $500 million in 2020.
Cost-Reduction Activities
Avery Dennison realized $15 million in pre-tax savings from restructuring in the second quarter. The company anticipates incremental savings from restructuring actions of $60-$70 million during 2020. Carryover savings, net of transition costs, of approximately $70 million is projected for 2021. On top of this, the company is targeting net temporary savings of approximately $150 million in 2020, over half of which has been realized in the first half of the year.
Guidance
Avery Dennison expects sales and earnings to fall in 2020 on lower demand. In the third quarter, the company anticipates a decline in sales of 5-7%, before the impact of currency translation. Organic sales is expected to decline 7-9% in the quarter.
Price Performance
Shares of Avery Dennison have gained 3.4% in the past year, against the industry’s decline of 20.0%.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Lakeland Industries, Inc. (LAKE - Free Report) , IIVI Incorporated and Silgan Holdings Inc. (SLGN - Free Report) . All of these stocks carry a Zacks Rank of 1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lakeland Industries has a projected earnings growth rate of 418% for the current fiscal year. The company’s shares have appreciated 111% in the past year.
IIVI Incorporated has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have gained 10% in the past year.
Silgan has an expected earnings growth rate of 28.7% for 2020. The stock has surged 23% in a year’s time.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>