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Avery Dennison (AVY) Up 4.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Avery Dennison (AVY - Free Report) . Shares have added about 4.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Avery Dennison Earnings and Sales Top Estimates in Q3
Avery Dennison reported adjusted earnings of $1.66 per share in third-quarter 2019, which surpassed the Zacks Consensus Estimate of $1.60. The figure also increased around 14% year over year.
Including one-time items, the company posted net income of $1.71 per share compared with the year-ago quarter’s earnings per share (EPS) of $1.69.
Total revenues inched up nearly 0.1% year over year to $1,761.4 million and beat the Zacks Consensus Estimate of $1,756.3 million. Organic sales growth came in at 2.1% in the reported quarter.
Cost of sales in the quarter declined nearly 0.8% year over year to $1.29 billion. Gross profit rose 2.7% year over year to $471.7 million. Gross margin increased to 26.8% from 26.1% in the prior-year quarter.
Marketing, general and administrative expenses totaled $265.3 million compared with $270.5 million reported in the year-ago quarter. Adjusted operating profit came in at $206.4 million, up from the $188.7 million recorded in the prior-year quarter. Adjusted operating margin rose to 11.7% from the year-earlier quarter’s level of 10.7%.
Segment Highlights
Revenues in the Label and Graphic Materials segment dipped 0.8% year over year to $1,185.1 million. On an organic basis, sales inched up 1.2%. Adjusted operating profit rose 9.1% year on year to $160.2 million.
Revenues in the Retail Branding and Information Solutions segment rose 2.1% year over year to $406.8 million. On an organic basis, sales were up 4.1% as consistent strength in RFID offset slowdown in base business. The segment’s adjusted operating income increased 3.3% to $46.9 million.
Net sales in the Industrial and Healthcare Materials segment amounted to $169.5 million, increasing 1.4% from the prior-year quarter. On an organic basis, sales were up 3.7%. The segment reported adjusted operating income of $18.6 million compared with $15.3 million in the prior-year quarter.
Financial Updates
Avery Dennison had cash and cash equivalents of $224.2 million at the end of the third quarter, up from $217.6 million at the end of the year-ago quarter. During the first nine months of 2019, the company generated $467 million in cash from operating activities compared with $187.7 million reported in the year-ago quarter.
During the third quarter, Avery Dennison repurchased 0.8 million shares for a total cost of $87.6 million. The company’s share count declined 3.8 million in the quarter.
The company’s long-term debt increased to $1,483.7 million as of Sep 28, 2019 compared with $1,295.3 million as of Sep 29, 2018.
Cost-Reduction Activities
Avery Dennison realized around $18 million in pre-tax savings from restructuring in the third quarter. The company incurred pre-tax restructuring charges of nearly $3 million.
Guidance
For 2019, Avery Dennison revised its adjusted EPS guidance to $6.50-$6.60. Including the impact of the pension-settlement charge, the company tightened EPS guidance to $3.15-$3.25 from the prior estimate of $3.15-$3.30.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Avery Dennison has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Avery Dennison has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Avery Dennison (AVY) Up 4.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Avery Dennison (AVY - Free Report) . Shares have added about 4.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Avery Dennison Earnings and Sales Top Estimates in Q3
Avery Dennison reported adjusted earnings of $1.66 per share in third-quarter 2019, which surpassed the Zacks Consensus Estimate of $1.60. The figure also increased around 14% year over year.
Including one-time items, the company posted net income of $1.71 per share compared with the year-ago quarter’s earnings per share (EPS) of $1.69.
Total revenues inched up nearly 0.1% year over year to $1,761.4 million and beat the Zacks Consensus Estimate of $1,756.3 million. Organic sales growth came in at 2.1% in the reported quarter.
Cost of sales in the quarter declined nearly 0.8% year over year to $1.29 billion. Gross profit rose 2.7% year over year to $471.7 million. Gross margin increased to 26.8% from 26.1% in the prior-year quarter.
Marketing, general and administrative expenses totaled $265.3 million compared with $270.5 million reported in the year-ago quarter. Adjusted operating profit came in at $206.4 million, up from the $188.7 million recorded in the prior-year quarter. Adjusted operating margin rose to 11.7% from the year-earlier quarter’s level of 10.7%.
Segment Highlights
Revenues in the Label and Graphic Materials segment dipped 0.8% year over year to $1,185.1 million. On an organic basis, sales inched up 1.2%. Adjusted operating profit rose 9.1% year on year to $160.2 million.
Revenues in the Retail Branding and Information Solutions segment rose 2.1% year over year to $406.8 million. On an organic basis, sales were up 4.1% as consistent strength in RFID offset slowdown in base business. The segment’s adjusted operating income increased 3.3% to $46.9 million.
Net sales in the Industrial and Healthcare Materials segment amounted to $169.5 million, increasing 1.4% from the prior-year quarter. On an organic basis, sales were up 3.7%. The segment reported adjusted operating income of $18.6 million compared with $15.3 million in the prior-year quarter.
Financial Updates
Avery Dennison had cash and cash equivalents of $224.2 million at the end of the third quarter, up from $217.6 million at the end of the year-ago quarter. During the first nine months of 2019, the company generated $467 million in cash from operating activities compared with $187.7 million reported in the year-ago quarter.
During the third quarter, Avery Dennison repurchased 0.8 million shares for a total cost of $87.6 million. The company’s share count declined 3.8 million in the quarter.
The company’s long-term debt increased to $1,483.7 million as of Sep 28, 2019 compared with $1,295.3 million as of Sep 29, 2018.
Cost-Reduction Activities
Avery Dennison realized around $18 million in pre-tax savings from restructuring in the third quarter. The company incurred pre-tax restructuring charges of nearly $3 million.
Guidance
For 2019, Avery Dennison revised its adjusted EPS guidance to $6.50-$6.60. Including the impact of the pension-settlement charge, the company tightened EPS guidance to $3.15-$3.25 from the prior estimate of $3.15-$3.30.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Avery Dennison has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Avery Dennison has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.