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Avery Dennison Hits 52-Week High: What's Driving the Rally?

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Shares of Avery Dennison Corporation AVY scaled a fresh 52-week high of $134.88 during trading session on Jan 17, before retracting a bit to close at $134.72. Acquisitions, growth in high-value product categories, productivity improvement and strong presence in emerging markets contributed to this rally.

The company has a market cap of $11.25 billion. Over the last three months, its average volume of shares traded has been 440.6M. The company has an expected long-term earnings per share growth rate of 8.2%.

The company outpaced the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 2.21%.

Notably, the stock has rallied 20% over the past six months, outperforming the industry’s gain of 15.7%.

Driving Factors

Avery Dennison continues to deliver solid margin expansion and double-digit adjusted earnings improvement, backed by acquisitions, organic growth and solid presence in emerging markets.

The company is focused on four overarching priorities, which include driving growth in high-value product categories, enhancing profitability in base businesses, relentlessly pursuing productivity improvement and a disciplined capital-management approach.

The Label and Graphic Materials segment will maintain its stellar top-line momentum and margin expansion, aided by growth in emerging markets and focus on high-value categories led by specialty labels and contributions from productivity initiatives. Furthermore, the completion of restructuring actions associated with the consolidation of its European footprint will bring in higher returns and provide the segment a competitive edge.

The company will benefit from its fast-growing high-value product categories, such as specialty labels and Radio-frequency identification. Avery Dennison anticipates strong engagement among apparel retailers and brands, as well as promising early-stage developments in other end markets. Moreover, the company has increased investments to fuel growth with higher spending for business development and R&D.

The Industrial and Healthcare Materials (IHM) segment will benefit from the Yongle, Finesse and Mactac acquisitions. Moreover, Avery Dennison’s balance sheet remains robust and has ample capacity to keep funding acquisitions, executing disciplined capital-allocation strategy, investing in organic growth and returning cash to shareholders

Positive Growth Projections

The Zacks Consensus Estimate for the company’s ongoing-year earnings is currently pegged at $7.05, suggesting year-over-year growth of 7.7%.

Zacks Rank & Stocks to Consider

Avery Dennison currently carries a Zacks Rank #3 (Hold)

Some better-ranked stocks in the Industrial Products sector are DXP Enterprises, Inc. DXPE, Cintas Corporation CTAS and Graphic Packaging Holding Company (GPK - Free Report) . While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Cintas and Graphic Packaging carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

DXP Enterprises has an estimated earnings growth rate of 10.5% for the ongoing year. In a year’s time, the stock has appreciated 23.1%.

Cintas has an expected earnings growth rate of 15.6% for the current year. The stock has surged 57.8% over the past year.

Graphic Packaging has a projected earnings growth rate of 13.1% for 2020. The company’s shares have gained 40.5% in the past year.

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