What Makes Avery Dennison (AVY) An Investment-Worthy Stock

Avery Dennison Corporation (NYSE:AVY) looks poised to be a good investment in 2018. Its consistent execution of strategies continues to enhance competitive advantage while driving profitable growth. Focus on productivity, acquisitions, aggressive cost control and share repurchases are also likely to drive results.

Here are six reasons to pick this Pasadena, CA-based company’s stock this year.

Bullish Rank and Solid VGM Score: Avery Dennison, which produces pressure-sensitive materials, along with a variety of tickets, tags, labels and other converted products, carries a Zacks Rank #2 (Buy) and a favorable VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Back-tested results show that only stocks with a VGM Style Score of A or B when combined with a Zacks Rank of 1 or 2, offer the best upside potential.

Shares Trended Up in a Year: Shares of Avery Dennison, whose products are sold under the Avery, Avery Dennison, Avery Graphics and Fasson brands, have outperformed the industry in a year’s time. The stock has surged 60.4%, outperforming the industry’s growth of 43.9%.




Upward Estimate Revisions: The stock has witnessed the Zacks Consensus Estimate for 2017 earnings per share going up 4% to $4.93 in the last 90 days. The Zacks Consensus Estimate for 2018 earnings per share has advanced 4% to $5.46.

Positive Surprise History: Avery Dennison has trumped the Zacks Consensus Estimate in the trailing four quarters. The company has an average positive earnings surprise history of 6.85% over the said period.

Bullish Outlook for 2017: Avery Dennison projects adjusted earnings per share guidance in the range of $4.90-$4.95 for fiscal 2017. The midpoint of the guidance range reflects year-over-year growth of 23%. The company anticipated reported sales growth in the range of 8% for the full year.

Segments Poised for Growth: The Label and Graphic Materials segment is Avery Dennison’s largest as well as highest-return business and will benefit from growth in emerging market regions including high-single digit growth in India and China.

The Industrial and Healthcare Materials segment will benefit from the Yongle, Finesse and Mactac acquisitions. The company is focusing on efforts to drive productivity, while continuing to invest to support growth and expects the segment to achieve operating margins at the levels or even higher than the Label and Graphic Materials segment.

The Retail Branding and Information Solutions segment continues to perform well on the back of business model transformation that has enabled it gain share market share, while driving significant margin expansion. Avery Dennison has increased the segment’s competitiveness through strategic pricing initiatives. It is expected RFID (Radio-frequency identification) sales should grow more than 20% annually for the next few years backed by multiple customer rollouts and new programs.

Key Picks

Some other top-ranked stocks in the industrial products sector are Deere & Company (NYSE:DE) and Kennametal Inc. (NYSE:KMT) both flaunting a Zacks Rank #1, while Parker-Hannifin Corporation (NYSE:PH) carries a Zacks Rank #2.

Deere has delivered an average positive earnings surprise of 19.52% in the trailing four quarters. Its shares have gained 49% in the past year.

Kennametal has an average positive earnings surprise of 20.56% in the trailing four quarters. Its shares have rallied 52% in the past year.

Parker-Hannifin has delivered an average positive earnings surprise of 16.55% in the trailing four quarters. Its shares have gone up 40% over the past year.

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