Can Avery Dennison (AVY) Pull Off A Surprise In Q1 Earnings?

Avery Dennison Corporation (NYSE:AVY) is set to release first-quarter 2017 results on Apr 26, before the opening bell.

In the prior quarter, the company reported a positive earnings surprise of 6.45%. It is worth noting that Avery Dennison outperformed the Zacks Consensus Estimate in all the trailing four quarters, the average positive surprise being 6.17%.

Let’s see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Avery Dennison is likely to beat on earnings because it has the right combination of two key ingredients.

Zacks ESP: Avery Dennison has an Earnings ESP of +2.89%. This is because the Most Accurate estimate is pegged at $1.07, higher than the Zacks Consensus Estimate of $1.04. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Avery Dennison carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Notably, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Meanwhile, Avery Dennison’s combination of a Zacks Rank #2 and +1.83% ESP makes us reasonably certain of an earnings beat.

What’s Driving the Better-Than-Expected Earnings?

Avery Dennison is poised to gain from increase in investment in specialty labels, graphics and reflective solutions business, as demonstrated by the acquisitions of Hanita Coatings, Mactac Europe, Hanita Coatings, and Ink Mill, as well as its investment to expand the plant in Luxembourg.

Further, the company’s execution of strategies continues to enhance its competitive advantage while driving profitable growth. Moreover, consistent focus on productivity, cost control and share repurchases are also anticipated to drive results.

Share Price Performance

Year to date, Avery Dennison outperformed the Zacks categorized Office Supply & Forms industry. The company’s shares gained around 17.1% compared with 12% growth recorded by the industry.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Deere & Company (NYSE:DE) has an Earnings ESP of +2.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar Inc. (NYSE:CAT) has an Earnings ESP of +9.84% and a Zacks Rank #1.

Parker-Hannifin Corporation (NYSE:PH) has an Earnings ESP of +0.54% and a Zacks Rank #1.

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