Is This The Right Time To Buy Avery Dennison (AVY) Stock?

On Jun 15, we issued an updated research report on Avery Dennison Corporation (NYSE:AVY) , a producer of pressure-sensitive materials, and variety of tickets, tags, labels and other converted products.

In the first quarter of 2016, both of Avery Dennison’s core businesses delivered solid organic sales growth and significant margin expansion, driving 16% growth in adjusted earnings. For 2016, the company raised its adjusted earnings per share guidance to the range of $3.75–$3.90 from the previous projection of $3.65–$3.85, reflecting some relief from currency translation headwinds, combined with a strong operating performance in the first quarter. Constant focus on productivity and capital discipline will help the company deliver strong returns for shareholders.

Avery Dennison’s results reflect persistent outperformance of Pressure-sensitive materials. The company rcontinues to drive growth through differentiated quality, service and innovation, with focus on high-value market segments such as tapes, graphics, RFID and emerging markets. The company will continue to invest both organically and through bolt-on acquisitions.

In addition to accelerating growth in high-value categories, it remains focused on driving growth in areas that are less differentiated, such as base materials, for bar code labels in Pressure-sensitive. The company is increasing competitiveness by lowering costs and tailoring go-to-market strategies. Finally, productivity improvement remains a top priority. This has been the company’s core strength over the years. Moreover, Avery Dennison will gain from sustained deployment of lean and six sigma, ongoing innovation and product reengineering, and investments in automation and restructuring.

The Retail Branding and Information Solutions (RBIS) unit continues to execute business model transformation, which will enable this business to win in the less differentiated value and contemporary segments, while driving significant margin expansion. Aggressive restructuring activities and other productivity actions will help Avery Dennison achieve its long-term financial goals. Further, the company is reducing fixed costs, localizing material sourcing and responding more quickly to changes in customer needs by decentralizing decision making. These actions will support the company’s growth in the second quarter.

Avery Dennison remains focused on making investments to support growth through acquisitions. The company signed a definitive agreement to acquire Mactac Europe from Platinum Equity for (€200 million) $226 million, including assumed debt. The acquisition remains in line with the company’s strategic priority to further penetrate high-value segments, pressure-sensitive materials for graphics applications. The buyout is expected to have an immaterial impact on EPS in 2016 and be approximately 10 cents accretive to EPS in 2017.

Avery Dennison repurchased 1.5 million shares in the first quarter of 2016 for $96 million and paid $33 million in dividends. Further repurchases will support the stock. On Apr 28, the company announced an 11% increase in its quarterly cash dividend to 41 cents per share. The company estimates incremental pretax savings from restructuring actions to contribute roughly $75 million in 2016.

Buoyed by bright prospects, the Zacks Consensus Estimate moved higher as analysts raised their estimates. Analysts polled by Zacks are convinced that this Zacks Rank #2 (Buy) stock will see an upbeat performance in the future. Avery Dennison’s estimates for the current year has moved north 2% to $3.85 over the past 60 days. For 2017, the Zacks Consensus Estimate is at $4.27, moving up 2% over the said timeframe.

Other stocks worth considering in the sector include ACCO Brands Corporation (NYSE:ACCO) , Berry Plastics Group, Inc. (NYSE:BERY) and Packaging Corporation of America (NYSE:PKG) . ACCO Brands sports a Zacks Rank #1 (Strong Buy), while Berry Plastics and Packaging Corporation carry the same rank as Avery Dennison.


PACKAGING CORP (PKG): Free Stock Analysis Report

AVERY DENNISON (AVY): Free Stock Analysis Report

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

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