We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Reasons to Hold Avery Dennison Stock in Your Portfolio Now
Read MoreHide Full Article
Avery Dennison Corporation (AVY - Free Report) remains well poised for growth on acquisitions, strong presence in emerging markets and upbeat momentum across all segments. Growth in high-value product categories, focus on productivity improvement and a disciplined capital-management approach will also stoke growth. However, its performance will be affected by sluggish market trends and negative currency-translation impact.
The stock has an estimated long-term earnings growth rate of 8%, higher than the industry’s 7.5%.
The company currently carries a Zacks Rank #3 (Hold) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities.
Factors Favoring Avery Dennison
Earnings Beat Q4 Estimates
Avery Dennison’s adjusted earnings of $1.73 per share in fourth-quarter 2019 surpassed the Zacks Consensus Estimate of $1.68, increasing year on year.
Encouraging Outlook
For the current year, Avery Dennison expects adjusted EPS of $6.90-$7.15, up from the prior-year range of $6.45 to $6.70, reflecting improved volume growth and continued productivity gains. Organic sales growth is estimated to be 2-3%.
Price Performance
Over the past year, Avery Dennison’s shares have gained 31.8%, outperforming the industry’s growth of 27.8%.
Earnings Surprise History
The company outpaced the Zacks Consensus Estimate in the trailing four quarters, the average positive beat being 2.62%.
Return on Equity (ROE)
Avery Dennison’s trailing 12-month ROE of 52% reinforces its growth potential. The company’s ROE is higher than the ROE of 21.6% for the industry, highlighting its efficiency in utilizing shareholders’ funds.
Upbeat Earnings Growth Projections
The Zacks Consensus Estimate for the company’s ongoing-year earnings per share is currently pegged at $7.04, suggesting 6.7% year-on-year growth.
Growth Drivers
Avery Dennison continues to register stellar profit, margin expansion and double-digit adjusted earnings improvement, aided by acquisitions, organic growth and strong presence in emerging markets. The company is focused on four overarching priorities, comprising fueling 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 upbeat top-line momentum and margin expansion in the current year, aided by growth in emerging markets, volume improvement, 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 a competitive edge to the segment.
The company will benefit from its fast-growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID). Continued strength in RFID and external embellishments will bolster Retail Branding and Information Solutions segment sales.
Moreover, the company has increased investments to fuel growth with higher spending for business development and R&D. In sync with this, the company acquired Smartrac’s Transponder (RFID Inlay) Division. The deal will generate more than $450 million in revenues, with RFID business anticipated to grow 15-20% annually over the long term.
The Industrial and Healthcare Materials (IHM) segment will benefit from margin expansion target as well as the Yongle, Finesse and Mactac acquisitions. Avery Dennison’s balance sheet remains strong and has ample capacity to continue funding acquisitions, executing disciplined capital-allocation strategy, investing in organic growth and returning cash to shareholders.
Risks
Despite significant growth prospects, Avery Dennison is plagued by sluggish market trends and currency headwinds. These are likely to unfavorably impact the company’s near-term results.
SPX FLOW has a projected earnings growth rate of 9.1% for 2020. The company’s shares have rallied 37.6% in the past year.
Tennant has an estimated earnings growth rate of 30.7% for the ongoing year. In a year’s time, the stock has appreciated 28.7%.
Cintas has an expected earnings growth rate of 15.6% for the current year. The stock has surged 49.3% over the past year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Reasons to Hold Avery Dennison Stock in Your Portfolio Now
Avery Dennison Corporation (AVY - Free Report) remains well poised for growth on acquisitions, strong presence in emerging markets and upbeat momentum across all segments. Growth in high-value product categories, focus on productivity improvement and a disciplined capital-management approach will also stoke growth. However, its performance will be affected by sluggish market trends and negative currency-translation impact.
The stock has an estimated long-term earnings growth rate of 8%, higher than the industry’s 7.5%.
The company currently carries a Zacks Rank #3 (Hold) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities.
Factors Favoring Avery Dennison
Earnings Beat Q4 Estimates
Avery Dennison’s adjusted earnings of $1.73 per share in fourth-quarter 2019 surpassed the Zacks Consensus Estimate of $1.68, increasing year on year.
Encouraging Outlook
For the current year, Avery Dennison expects adjusted EPS of $6.90-$7.15, up from the prior-year range of $6.45 to $6.70, reflecting improved volume growth and continued productivity gains. Organic sales growth is estimated to be 2-3%.
Price Performance
Over the past year, Avery Dennison’s shares have gained 31.8%, outperforming the industry’s growth of 27.8%.
Earnings Surprise History
The company outpaced the Zacks Consensus Estimate in the trailing four quarters, the average positive beat being 2.62%.
Return on Equity (ROE)
Avery Dennison’s trailing 12-month ROE of 52% reinforces its growth potential. The company’s ROE is higher than the ROE of 21.6% for the industry, highlighting its efficiency in utilizing shareholders’ funds.
Upbeat Earnings Growth Projections
The Zacks Consensus Estimate for the company’s ongoing-year earnings per share is currently pegged at $7.04, suggesting 6.7% year-on-year growth.
Growth Drivers
Avery Dennison continues to register stellar profit, margin expansion and double-digit adjusted earnings improvement, aided by acquisitions, organic growth and strong presence in emerging markets. The company is focused on four overarching priorities, comprising fueling 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 upbeat top-line momentum and margin expansion in the current year, aided by growth in emerging markets, volume improvement, 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 a competitive edge to the segment.
The company will benefit from its fast-growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID). Continued strength in RFID and external embellishments will bolster Retail Branding and Information Solutions segment sales.
Moreover, the company has increased investments to fuel growth with higher spending for business development and R&D. In sync with this, the company acquired Smartrac’s Transponder (RFID Inlay) Division. The deal will generate more than $450 million in revenues, with RFID business anticipated to grow 15-20% annually over the long term.
The Industrial and Healthcare Materials (IHM) segment will benefit from margin expansion target as well as the Yongle, Finesse and Mactac acquisitions. Avery Dennison’s balance sheet remains strong and has ample capacity to continue funding acquisitions, executing disciplined capital-allocation strategy, investing in organic growth and returning cash to shareholders.
Risks
Despite significant growth prospects, Avery Dennison is plagued by sluggish market trends and currency headwinds. These are likely to unfavorably impact the company’s near-term results.
Stocks to Consider
Some better-ranked stocks in the Industrial Products sector are SPX FLOW, Inc. (FLOW - Free Report) , Tennant Company (TNC - Free Report) and Cintas Corp. (CTAS - Free Report) , each currently carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
SPX FLOW has a projected earnings growth rate of 9.1% for 2020. The company’s shares have rallied 37.6% in the past year.
Tennant has an estimated earnings growth rate of 30.7% for the ongoing year. In a year’s time, the stock has appreciated 28.7%.
Cintas has an expected earnings growth rate of 15.6% for the current year. The stock has surged 49.3% over the past year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>