Avery Dennison Corporation (NYSE:AVY) reported adjusted earnings of $1.01 per share in third-quarter 2016, which surged 16% from 87 cents earned in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate by a penny, a positive surprise of 1%.
Including restructuring costs and other items, earnings from continuing operations were 98 cents per share in the quarter, compared with 87 cents in the year-ago quarter.
Total revenue edged up 2.8% to $1,509 million from $1,468 million in the prior-year quarter. Moreover, revenues came above the Zacks Consensus Estimate of $1,503 million. On an organic basis, sales were up 3% year over year.
Cost of sales in the reported quarter went up 2.7% year over year to $1,091 million. Gross profit increased around 2.9% to $417.6 million, with gross margin expanding 10 basis points (bps) to 27.7%.
Marketing, general and administrative expenses were $270.3 million compared with $268.1 million in the year-ago quarter. Adjusted operating profit advanced 7% year over year to $147.3 million. Adjusted operating margin improved 40 bps on a year-over-year basis to 9.8%.
Segmental Performance
Revenues from the Pressure-sensitive Materials segment went up 4% to $1,124 million. On an organic basis, sales grew 3%. Adjusted operating profit expanded 7% to $141.4 million from $131.6 million in the year-ago quarter.
Revenues from the Retail Branding and Information Solutions segment edged up 1% to $371 million from $367 million in the year-earlier quarter. Organic sales increased 2%. The segment’s adjusted operating income improved 3% to $29.9 million.
The Vancive Medical Technologies segment reported net sales of $14 million, slumping 20% from $17.6 million in the year-ago quarter. The segment reported adjusted operating loss of $0.5 million against an operating profit of $0.5 million a year ago.
Financial Updates
Avery Dennison had cash and cash equivalents of $189 million at the end of third-quarter 2016 compared with $143.8 million at the end of third-quarter 2015. Cash flow from operations came in at $365.7 million for the nine-month period ended Oct 1, 2016 compared with $282.2 million in the comparable year-ago period.
At quarter end, Avery Dennison’s long-term debt decreased to $713 million from $963.9 million as of Oct 3, 2015.
During the first nine months of 2016, Avery Dennison repurchased 2.7 million shares for a total cost of $182 million. The company reduced its share count by 1.0 million. The cost of repurchases, net of proceeds from stock option exercises stands at $118 million.
Cost Reduction Activities
In the third quarter, Avery Dennison realized approximately $21 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $3 million.
Guidance
For 2016, Avery Dennison raised its adjusted earnings per share guidance to $3.95–$4.00 from the previous range of $3.80–$3.95, reflecting a lower tax rate. Including one-time items, earnings are projected in the band of $3.50–$3.55 per share.
The company remains confident that the consistent execution of strategies will facilitate long-term goals for superior value creation through a balance of profitable growth and capital discipline.
AVERY DENNISON Price, Consensus and EPS Surprise
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