Avery Beats on Q4 Earnings - Analyst Blog


Avery Dennison Corporation ( AVY ) reported adjusted earnings of 69 cents per share in the fourth quarter of 2013, which beat the Zacks Consensus Estimate of 67 cents. The reported figure was also up 44% from 48 cents in the year-ago quarter.  

Including restructuring costs and other items, earnings from continuing operations were 45 cents per share in the quarter compared with 28 cents in the year-ago quarter.

Total revenue increased 7% (organic as well as reported basis) to $1.584 billion from $1.483 billion in the prior-year quarter. Revenues also surpassed the Zacks Consensus Estimate of $1.537 billion.

Cost of sales in the reported quarter rose 6% year over year to $1.17 billion. Gross profit increased 8.9% to $416 million from $382 million in the prior-year quarter. Gross margin expanded 30 basis points to 26%.

Marketing, general & administrative expenses were $299 million versus $289 million in the year-ago quarter. Adjusted operating profit increased 26% to $117 million while adjusted operating margin improved 110 basis points to 7.4% on a year-over-year basis.

Segmental Performance

Total revenue in the Pressure-sensitive Materials segment increased 8% to $1.14 billion. Label and Packaging Materials sales rose in mid single digits while sales for Graphics, Reflective, and Performance Tapes increased in low double digits. Adjusted operating profit increased 21.7% to $110.8 million in the quarter driven by benefit of productivity initiatives, lower restructuring costs and higher volume, which helped mitigate changes in product mix.

Total revenue from Retail Branding and Information Solutions increased 2% to $417.4 million from $407.5 million in the year-earlier quarter. The improvement was driven by increased demand from European retailers and brands. The segment's adjusted operating income rose 26% to $31.5 million on productivity initiatives and higher volumes, partially offset by employee-related expenses.

Other specialty converting businesses segment reported net sales of $17.4 million, up 15% from $15.1 million in the year-ago quarter. The segment reported an operating loss of $2.1 million, narrower than the year-ago quarter loss of $2.5 million.

Financial Updates

Avery ended 2013 with cash and cash equivalents of $352 million, up from $235.4 million in 2012. Cash from operations for the fiscal 2013 was $320.1 million versus $513.4 million in prior year.

Long-term debt of the company increased to $951 million as of Dec 28, 2013 from $702 million as of Dec 29, 2012. Debt-to-capitalization ratio contracted to 41% as of Dec 28, 2013 from 44% as of Dec 29, 2012. Avery reported free cash flow of $304 million in 2013, up from $303 million in 2012. Avery repurchased 6.6 million shares for $283 million in fiscal 2013.

Cost Reduction Activities

In 2013, the company realized approximately $75 million in savings from the restructuring program initiated in the first half of 2012. The company incurred restructuring costs, net of gain on sale of assets, of around $23 million in 2013.

Fiscal 2013 Performance

For full-year 2013, Avery reported adjusted earnings per share (EPS) of $2.68, a 37% improvement from $1.96 in 2012. Earnings were within the company's guidance range of $2.60 to $2.70 per share. The results marginally surpassed the Zacks Consensus Estimate of $2.66. Including one-time items, EPS was $2.16 compared with $2.08 in the prior year.

Revenues for the year 2013 increased 5% year over year to $6.14 billion. Revenues surpassed the Zacks Consensus Estimate of $6.09 billion.

Fiscal 2014 Outlook

Avery expects its full-year 2014 adjusted earnings in the range of $2.90 to $3.20 per share. Including an estimated $0.30 per share for restructuring costs and other items, the company's earnings guidance was in the range of $2.60 to $2.90.

Pasadena, California-based Avery Dennison manufactures pressure-sensitive materials and tickets, tags, labels and other converted products. The company has over 200 manufacturing and distribution facilities in more than 60 countries.

Currently, Avery has a Zacks Rank #4 (Sell). Among other companies in the same industry, United Stationers Inc. ( USTR ) is slated to announce fourth-quarter 2013 results on Feb 13 and ACCO Brands Corp. ( ACCO ) on Feb 12. Another peer, CompX International Inc. ( CIX ) is also expected to report its fourth-quarter results soon.

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

AVERY DENNISON (AVY): Free Stock Analysis Report

UTD STATIONERS (USTR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ACCO , AVY , EPS , USTR



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