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Avery Dennison (AVY) Q3 Earnings & Sales Beat, EPS View Up

Avery Dennison Corporation AVY reported adjusted earnings of $1.26 per share in third-quarter 2017, up 25% from $1.01 recorded in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.21.

Including restructuring costs, earnings from continuing operations came in at $1.20 per share in the quarter compared with 98 cents recorded in the prior-year quarter.

Total revenues jumped around 11.3% to $1.68 billion from $1.51 billion recorded in the year-earlier quarter. Moreover, the figure surpassed the Zacks Consensus Estimate of $1.65 billion. On an organic basis, sales were up nearly 5.3% year over year.

Avery Dennison Corporation Price, Consensus and EPS Surprise

 

Avery Dennison Corporation Price, Consensus and EPS Surprise | Avery Dennison Corporation Quote

Cost of sales in the reported quarter went up 12.5% year over year to $1.23 billion. Gross profit increased around 8% to $451.6 million, while gross margin contracted 80 basis points (bps) to 26.9%.

Marketing, general and administrative expenses came in at $277 million compared with $270 million incurred in the year-ago quarter. Adjusted operating profit advanced 18.4% year over year to $174.4 million. Adjusted operating margin expanded 60 bps on a year-over-year basis to 10.4%.

Segmental Performance

Revenues from the Label and Graphic Materials segment climbed 8.7% year over year to $1,137 million. On an organic basis, sales grew around 5.1%. Adjusted operating profit rose 11.5% to $148.7 million from $133.4 million in the comparable period last year.

Revenues from the Retail Branding and Information Solutions segment grew 6.3% to $373.8 million from $351.5 million recorded in the year-earlier quarter. Organic sales growth came in at 6.5%. The segment’s adjusted operating income surged 32.4% to $32.7 million.

The Industrial and Healthcare Materials segment reported net sales of $168.4 million, up 51.8% from $110.9 million recorded in the prior-year quarter. The segment reported adjusted operating income of $14 million compared to the operating profit of $12.7 million recorded in the year-ago period.

Financial Updates

Avery Dennison generated cash and cash equivalents of $232.3 million at the end of third-quarter 2017 compared with $189.4 million recorded as of Oct 1, 2016. Cash flow from operations came in at $392.6 million during the nine-month period ended Sep 30, 2017, compared to $365.7 million recorded in the comparable period last year.

At the end of the third quarter, Avery Dennison’s long-term debt increased to $1,298 million compared with $713 million witnessed at the end of the prior-year quarter.

During the reported quarter, Avery Dennison repurchased 0.4 million shares for a total cost of $35 million. The company’s share count decreased 0.1 million in the reported quarter.

Cost-Reduction Activities

In the third quarter, Avery Dennison realized approximately $14 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $10 million.

Guidance

For 2017, Avery Dennison raised its adjusted earnings per share guidance range to $4.90-$4.95 from the prior band of $4.75-$4.90 on the back of better-than-expected operating results. The company remains confident about the continued execution of strategies which will help achieve profitable growth and improving returns.

Share Price Performance

Year to date, Avery Dennison has outperformed its industry with respect to price performance. The stock has gained 40.9%, while the industry recorded growth of 31.2% during the same time frame.



Zacks Rank & Key Picks

Currently, Avery Dennison carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the same space include Barnes Group Inc. B, Graco Inc. GGG and Lakeland Industries, Inc. LAKE. All three stocks flaunt a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barnes Group has an expected long-term earnings growth rate of 9%.

Graco has an expected long-term earnings growth rate of 10.5%.

Lakeland Industries has an expected long-term earnings growth rate of 10%.

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