A month has gone by since the last earnings report for Avery Dennison (AVY Quick QuoteAVY - Free Report) . Shares have added about 0.8% 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 Q2 Earnings Miss, Revenues Dip Y/Y

Avery Dennison has delivered adjusted earnings of $1.92 per share, missing the Zacks Consensus Estimate of $2.01 in second-quarter 2023. The bottom line marked a 27% year-over-year decline.

Including one-time items, the company has reported earnings per share (EPS) of $1.24 compared with the year-ago quarter’s $2.61.

Total revenues fell 10.9% year over year to $2,091 million, missing the Zacks Consensus Estimate of $2,163 million.

Cost of sales in the quarter fell 9.8% year over year to $1,537 million. The gross profit declined 13.9% year over year to $553 million.

Marketing, general and administrative expenses were $320 million compared with the $333 million incurred in the year-ago quarter. The adjusted operating profit amounted to around $234 million compared with the prior-year quarter’s $311 million. The adjusted operating margin was 11.2% in the quarter compared with the year-ago quarter’s 13.2%.

Segmental Highlights

Revenues in the Materials Group segment declined 12.6% year over year to $1,476 million in the reported quarter. The reported figure missed our estimate of $1523 million. On an organic basis, sales were down 10.5%. We predicted organic sales to fall 7.3%. The segment’s adjusted operating profit fell 19.2% year over year to $200 million.

Revenues in the Solutions Group were down 6.5% year over year to $615 million. We estimated revenues of $641 million for this segment. On an organic basis, sales declined 8.1%. Our model predicted a fall of 3.2%. The segment’s adjusted operating income slumped 36% year over year to $55 million.

Financial Updates

The company returned $216 million in cash to shareholders through share repurchases and dividend payments in the first half of 2023 and invested $194 million in acquisitions. AVY repurchased 0.5 million shares throughout the quarter.

Avery Dennison ended the quarter with cash and cash equivalents of $217 million compared with $165 million at the end of the prior-year quarter. The company’s long-term debt was $2,910 million at the end of the quarter under review, up from $2,493 million at the end of the second quarter of 2023.

Guidance

Avery Dennison expects third-quarter 2023 adjusted EPS of $2.00-$2.20.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -16.22% due to these changes.

VGM Scores

At this time, Avery Dennison has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Avery Dennison has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.