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Avery Dennison (AVY) Up 1.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Avery Dennison (AVY - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Avery Dennison due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Avery Dennison Q1 Earnings Top Estimates, Hikes '21 View
Avery Dennison reported first-quarter 2021 adjusted earnings of $2.40 per share, surpassing the Zacks Consensus Estimate of $2.01 by a margin of 19%. The bottom line also improved 45% year over year driven by significant margin expansion in all of its segments and its cost-saving actions.
Including one-time items, the company reported earnings per share of $2.50 compared with $1.60 in the year-ago quarter.
Total revenues increased 19% year over year to $2.05 billion and beat the Zacks Consensus Estimate of $1.92 billion. Sales were up 8.8% on an organic basis.
Cost of sales in the quarter improved 17.5% year over year to $1,454 million. Gross profit climbed 23% year over year to $597 million. Gross margin expanded 90 basis points year over year to 29.1% in the first quarter.
Marketing, general and administrative expenses were around $312 million compared with $281 million incurred in the year-ago quarter. Adjusted operating profit amounted to around $285 million, up 39.5% from the $204 million in the prior-year quarter. Adjusted operating margin was 13.9% in the quarter, up 210 basis points from the prior-year quarter.
Segment Highlights
Revenues in the Label and Graphic Materials (LGM) segment increased 17% year over year to $1,377 million in the reported quarter. Label and Packaging Materials sales were up 7%, with strong growth witnessed in both the high value product categories and the base business. Sales rose 9% in the combined Graphics and Reflective Solutions businesses. On an organic basis, sales were up 7.6%. Adjusted operating profit increased 29% year on year to $224 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment advanced 20% year over year to $483 million. On an organic basis, sales were up 9.3% reflecting strong growth in both the high value categories and the base business. The segment’s adjusted operating income soared 82% year over year to $62 million.
Net sales in the Industrial and Healthcare Materials (IHM) segment totaled $192 million, up 30% from $148 million in the prior-year quarter. This reflects a 20% increase in industrial categories and a low-single digit decline in healthcare categories. The segment reported adjusted operating income of $23.6 million compared with the prior-year quarter’s $15.4 million.
Financial Updates
Free cash flow in the reported quarter was $182 million compared with an usage of $35.3 million in the prior-year quarter. Avery Dennison recently raised its quarterly dividend rate by 10%. The company has repurchased 0.3 million shares in the first quarter for $56 million.
Avery Dennison ended the first quarter with cash and cash equivalents of $328 million compared with $742 million at the end of the prior-year quarter. As of the end of first-quarter 2021, the company’s net debt to adjusted EBITDA ratio was 1.6, well below the company’s long-term target of 2.3-2.6.
Guidance
Backed by strong performance in the first quarter and a higher organic growth assumption for the balance of the year, Avery Dennison now expects earnings per share between $8.40 to $8.80 in 2021 compared with the prior guidance of $7.65 to $8.05. The mid-point of the guidance range reflects year-over-year growth of 21%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.46% due to these changes.
VGM Scores
At this time, Avery Dennison has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Avery Dennison has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Avery Dennison (AVY) Up 1.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Avery Dennison (AVY - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Avery Dennison due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Avery Dennison Q1 Earnings Top Estimates, Hikes '21 View
Avery Dennison reported first-quarter 2021 adjusted earnings of $2.40 per share, surpassing the Zacks Consensus Estimate of $2.01 by a margin of 19%. The bottom line also improved 45% year over year driven by significant margin expansion in all of its segments and its cost-saving actions.
Including one-time items, the company reported earnings per share of $2.50 compared with $1.60 in the year-ago quarter.
Total revenues increased 19% year over year to $2.05 billion and beat the Zacks Consensus Estimate of $1.92 billion. Sales were up 8.8% on an organic basis.
Cost of sales in the quarter improved 17.5% year over year to $1,454 million. Gross profit climbed 23% year over year to $597 million. Gross margin expanded 90 basis points year over year to 29.1% in the first quarter.
Marketing, general and administrative expenses were around $312 million compared with $281 million incurred in the year-ago quarter. Adjusted operating profit amounted to around $285 million, up 39.5% from the $204 million in the prior-year quarter. Adjusted operating margin was 13.9% in the quarter, up 210 basis points from the prior-year quarter.
Segment Highlights
Revenues in the Label and Graphic Materials (LGM) segment increased 17% year over year to $1,377 million in the reported quarter. Label and Packaging Materials sales were up 7%, with strong growth witnessed in both the high value product categories and the base business. Sales rose 9% in the combined Graphics and Reflective Solutions businesses. On an organic basis, sales were up 7.6%. Adjusted operating profit increased 29% year on year to $224 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment advanced 20% year over year to $483 million. On an organic basis, sales were up 9.3% reflecting strong growth in both the high value categories and the base business. The segment’s adjusted operating income soared 82% year over year to $62 million.
Net sales in the Industrial and Healthcare Materials (IHM) segment totaled $192 million, up 30% from $148 million in the prior-year quarter. This reflects a 20% increase in industrial categories and a low-single digit decline in healthcare categories. The segment reported adjusted operating income of $23.6 million compared with the prior-year quarter’s $15.4 million.
Financial Updates
Free cash flow in the reported quarter was $182 million compared with an usage of $35.3 million in the prior-year quarter. Avery Dennison recently raised its quarterly dividend rate by 10%. The company has repurchased 0.3 million shares in the first quarter for $56 million.
Avery Dennison ended the first quarter with cash and cash equivalents of $328 million compared with $742 million at the end of the prior-year quarter. As of the end of first-quarter 2021, the company’s net debt to adjusted EBITDA ratio was 1.6, well below the company’s long-term target of 2.3-2.6.
Guidance
Backed by strong performance in the first quarter and a higher organic growth assumption for the balance of the year, Avery Dennison now expects earnings per share between $8.40 to $8.80 in 2021 compared with the prior guidance of $7.65 to $8.05. The mid-point of the guidance range reflects year-over-year growth of 21%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.46% due to these changes.
VGM Scores
At this time, Avery Dennison has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Avery Dennison has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.