Avery Dennison (AVY) Beats on Q2 Earnings, Ups 2016 View

Avery Dennison Corporation AVY reported adjusted earnings of $1.09 per share in second-quarter 2016, which grew 20% from 91 cents earned in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.01, with a positive surprise of 8%.

Including restructuring costs and other items, earnings from continuing operations were 88 cents per share in the quarter, compared with 69 cents in the year-ago quarter.

Total revenue edged up around 2% to $1,542 million from $1,516 million in the prior-year quarter. Moreover, revenues came just above the Zacks Consensus Estimate of $1,540 million. On an organic basis, sales were up 4% year on year.

Cost of sales in the reported quarter inched up 0.8% year over year to $1,107 million. Gross profit was up around 4% to $434 million, with gross margin expanding 70 basis points (bps) to 28.2%.

Marketing, general and administrative expenses were $269.2 million compared with $273.3 million in the year-ago quarter. Adjusted operating profit enhanced 15% to $164.9 million. Adjusted operating margin improved 120 bps on a year-over-year basis to 10.7%.

Segmental Performance

Revenues from the Pressure-sensitive Materials segment went up 3% to $1,145 million. On an organic basis, sales grew 5%. Adjusted operating profit expanded 13.5% to $154.8 million from $136.9 million in the year-ago quarter.

Revenues from the Retail Branding and Information Solutions segment declined 2% to $378 million from $383.8 million in the year-earlier quarter. Organic sales, however, increased 2%. The segment's adjusted operating income improved 8% to $30.7 million.

The Vancive Medical Technologies segment reported net sales of $18.4 million, up 2% from $18.1 million in the year-ago quarter. The segment reported adjusted operating income of $1.6 million against an operating loss of $0.8 million a year ago.

Financial Updates

Avery Dennison had cash and cash equivalents of $216 million at the end of second-quarter 2016 compared with $225.7 million at the end of second-quarter 2015. Cash flow from operations came in at $216 million for the six-month period ended Jul 2, 2016 compared with $1,704 million in the comparable year-ago period.

At quarter end, Avery Dennison's long-term debt decreased to $962.9 million from $964.7 million as of Jul 4, 2015. The company repurchased 0.9 million shares in second-quarter 2016 for $64 million.

Cost Reduction Activities

In the second quarter, Avery Dennison realized approximately $21 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $6 million.

Guidance

For 2016, Avery Dennison raised its adjusted earnings per share guidance to $3.80–$3.95 from the previous range of $3.75–$3.90, reflecting strong operating performance in the second quarter. Including one-time items, earnings are projected in the band of $3.35–$3.50 per share.

AVERY DENNISON Price, Consensus and EPS Surprise

AVERY DENNISON Price, Consensus and EPS Surprise | AVERY DENNISON Quote

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.

Pasadena, CA-based Avery Dennison manufactures pressure-sensitive materials. The company has over 200 manufacturing and distribution facilities in more than 60 countries.

Zacks Rank

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

Some better-ranked stocks in the same sector include Apogee Enterprises, Inc. APOG, Belden Inc. BDC and Mobile Mini, Inc. MINI. All three stocks sport a Zacks Rank #1 (Strong Buy).

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