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Avery Dennison (AVY) Beats on Q1 Earnings, Scraps '20 Guidance
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Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.66 per share in first-quarter 2020, surpassing the Zacks Consensus Estimate of $1.50. The figure also increased 12% year over year.
Including one-time items, the company posted net income of $1.60 per share, as against the net loss of $1.74 per share reported in the year-ago quarter.
Total revenues edged down 1% year over year to $1,723 million. The top-line figure, however, beat the Zacks Consensus Estimate of $1,719 million. Organic sales growth came in at 0.3% in the reported quarter.
Cost of sales in the quarter slid nearly 3% year over year to $1,238 million. Gross profit improved 4.3% year over year to $485 million. Gross margin increased to 28% from the prior-year quarter’s 27%.
Marketing, general and administrative expenses totaled $281 million compared with the $276 million incurred in the year-ago quarter. Adjusted operating profit came in at around $204 million, up from the $189 million recorded in the prior-year quarter. Adjusted operating margin rose to 11.8% from the year-earlier quarter level of 10.9%.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Revenues in the Label and Graphic Materials (LGM) segment inched up 0.2% year over year to $1,181 million. On an organic basis, sales were up 1.8%. Adjusted operating profit was up 18.2% year on year to $174 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment dropped 0.9% year over year to $395 million. On an organic basis, sales were down 1.1% due to significant demand decline in apparel markets reflecting widespread retail store and apparel manufacturing closures. The segment’s adjusted operating income plunged 31% year over year to $34 million. The company has completed the acquisition of Smartrac’s transponder business and its integration is on track.
Net sales in the Industrial and Healthcare Materials (IHM) segment amounted to $148 million, indicating a year-over-year decline of 9.7%. On an organic basis, sales were down 7.8% due to decline in industrial and healthcare categories. The segment reported adjusted operating income of $15.4 million compared with the prior-year quarter’s $15.5 million.
Financial Updates
Avery Dennison had cash and cash equivalents of around $742 million as of Mar 28, 2020, up from $226 million as of Mar 30, 2019. During the reported quarter, the company generated $4.4 million in cash from operating activities compared with the year-earlier quarter’s $35.4 million.
The company has temporarily suspended its share-repurchase activity on concerns over the coronavirus outbreak, while maintaining the quarterly dividend at its current rate of 58 cents per share.
The company’s long-term debt increased to $1,988 million as of Mar 28, 2020, compared with around $1,760 million as of Mar 30, 2019.
Cost-Reduction Activities
Avery Dennison realized $17 million in pre-tax savings from restructuring in the January-March period. The company incurred pre-tax restructuring charges of nearly $2 million. The company anticipates incremental savings from restructuring actions of $50-$60 million during 2020.
Guidance
Avery Dennison has revoked its EPS guidance for the current year in light of the uncertainties related to the coronavirus pandemic and its impact on global demand for the company’s products.
It expects the Label and Packaging Materials business to fare relatively better, while the RBIS and Graphics Solutions business is likely to be hit hard. The company now forecasts sales and earnings to decline in the current year on lower demand. This is likely to reflect the adverse impact on the second-quarter results. Organic sales are projected to be down 15-20% year over year in the ongoing quarter.
The company had initiated cost-control and cash-management initiatives to offset the decline in demand for certain of its businesses. This is likely to deliver free cash flow of at least $500 million in 2020 and 2021.
Price Performance
Shares of Avery Dennison have gained 6.5% in the past year, as against the industry’s 16.5% decline.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Sharps Compliance Corp. , Silgan Holdings Inc. (SLGN - Free Report) and Intellicheck, Inc. (IDN - Free Report) . While Sharps Compliance and Silgan sport a Zacks Rank #1 (Strong Buy), Intellicheck carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Sharps Compliance has an estimated earnings growth rate of 800% for the current year. In a year's time, the company’s shares have soared 105%.
Silgan has an expected earnings growth rate of 11.1% for 2020. The company’s shares have gained 16.4% in the past year.
Intellicheck has a projected earnings growth rate of 112.5% for the ongoing year. Over the past year, the company’s shares have rallied 31.6%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Avery Dennison (AVY) Beats on Q1 Earnings, Scraps '20 Guidance
Avery Dennison Corporation (AVY - Free Report) reported adjusted earnings of $1.66 per share in first-quarter 2020, surpassing the Zacks Consensus Estimate of $1.50. The figure also increased 12% year over year.
Including one-time items, the company posted net income of $1.60 per share, as against the net loss of $1.74 per share reported in the year-ago quarter.
Total revenues edged down 1% year over year to $1,723 million. The top-line figure, however, beat the Zacks Consensus Estimate of $1,719 million. Organic sales growth came in at 0.3% in the reported quarter.
Cost of sales in the quarter slid nearly 3% year over year to $1,238 million. Gross profit improved 4.3% year over year to $485 million. Gross margin increased to 28% from the prior-year quarter’s 27%.
Marketing, general and administrative expenses totaled $281 million compared with the $276 million incurred in the year-ago quarter. Adjusted operating profit came in at around $204 million, up from the $189 million recorded in the prior-year quarter. Adjusted operating margin rose to 11.8% from the year-earlier quarter level of 10.9%.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation price-consensus-eps-surprise-chart | Avery Dennison Corporation Quote
Segment Highlights
Revenues in the Label and Graphic Materials (LGM) segment inched up 0.2% year over year to $1,181 million. On an organic basis, sales were up 1.8%. Adjusted operating profit was up 18.2% year on year to $174 million.
Revenues in the Retail Branding and Information Solutions (RBIS) segment dropped 0.9% year over year to $395 million. On an organic basis, sales were down 1.1% due to significant demand decline in apparel markets reflecting widespread retail store and apparel manufacturing closures. The segment’s adjusted operating income plunged 31% year over year to $34 million. The company has completed the acquisition of Smartrac’s transponder business and its integration is on track.
Net sales in the Industrial and Healthcare Materials (IHM) segment amounted to $148 million, indicating a year-over-year decline of 9.7%. On an organic basis, sales were down 7.8% due to decline in industrial and healthcare categories. The segment reported adjusted operating income of $15.4 million compared with the prior-year quarter’s $15.5 million.
Financial Updates
Avery Dennison had cash and cash equivalents of around $742 million as of Mar 28, 2020, up from $226 million as of Mar 30, 2019. During the reported quarter, the company generated $4.4 million in cash from operating activities compared with the year-earlier quarter’s $35.4 million.
The company has temporarily suspended its share-repurchase activity on concerns over the coronavirus outbreak, while maintaining the quarterly dividend at its current rate of 58 cents per share.
The company’s long-term debt increased to $1,988 million as of Mar 28, 2020, compared with around $1,760 million as of Mar 30, 2019.
Cost-Reduction Activities
Avery Dennison realized $17 million in pre-tax savings from restructuring in the January-March period. The company incurred pre-tax restructuring charges of nearly $2 million. The company anticipates incremental savings from restructuring actions of $50-$60 million during 2020.
Guidance
Avery Dennison has revoked its EPS guidance for the current year in light of the uncertainties related to the coronavirus pandemic and its impact on global demand for the company’s products.
It expects the Label and Packaging Materials business to fare relatively better, while the RBIS and Graphics Solutions business is likely to be hit hard. The company now forecasts sales and earnings to decline in the current year on lower demand. This is likely to reflect the adverse impact on the second-quarter results. Organic sales are projected to be down 15-20% year over year in the ongoing quarter.
The company had initiated cost-control and cash-management initiatives to offset the decline in demand for certain of its businesses. This is likely to deliver free cash flow of at least $500 million in 2020 and 2021.
Price Performance
Shares of Avery Dennison have gained 6.5% in the past year, as against the industry’s 16.5% decline.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Sharps Compliance Corp. , Silgan Holdings Inc. (SLGN - Free Report) and Intellicheck, Inc. (IDN - Free Report) . While Sharps Compliance and Silgan sport a Zacks Rank #1 (Strong Buy), Intellicheck carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Sharps Compliance has an estimated earnings growth rate of 800% for the current year. In a year's time, the company’s shares have soared 105%.
Silgan has an expected earnings growth rate of 11.1% for 2020. The company’s shares have gained 16.4% in the past year.
Intellicheck has a projected earnings growth rate of 112.5% for the ongoing year. Over the past year, the company’s shares have rallied 31.6%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>