On Mar 13, we maintained our Outperform recommendation on
pressure-sensitive materials producer and provider of wide
variety of information and brand management solutions,
Avery Dennison Corporation
), based on strong organic sales growth, benefits from
restructuring initiatives and divestiture of its underperforming
Office and Consumer Products unit. Avery currently retains a
short-term Zacks Rank #1 (Strong Buy).
Avery's adjusted earnings increased 50% year over year to 54
cents per share in fourth-quarter 2012 and revenues rose 5% year
over year to $1.5 billion. Both were ahead of the respective
Zacks Consensus Estimates.
In the fourth quarter, net sales grew approximately 7% on an
organic basis, the strongest organic growth witnessed since the
first quarter of 2011. In 2012, organic sales grew 4%, primarily
aided by higher volumes for pressure sensitive materials and a
rebound in the core business of retail branding and information
solutions. The organic growth momentum is expected to continue in
2013 as well.
In order to attain its financial targets of double-digit
earnings growth and higher returns, Avery has aggressively
implemented a restructuring program to reduce cost across all the
business segments. The program is anticipated to be completed by
mid-2013. Avery expects to save more than $100 million annually
leveraging this program by mid-2013.
Avery's Office and Consumer Products segment has been a
long-struggling segment due to weak end-market demand and
cut-throat competition in the label category. In Jan 2013, Avery
has agreed to divest the segment along with its Designed and
Engineered Solutions businesses to CCL Industries Inc., a global
leader in specialty packaging solutions, for $500 million in
The net sale proceeds of approximately $400 million will be
utilized to repurchase shares and make an additional pension
contribution. With the divestiture of the weaker Office Products
business, Avery will be able to focus on its market-leading,
pressure sensitive materials business and Retail Branding and
Information Solutions segment.
Other Stocks to Consider
Other stocks in the same industry with favorable Zacks rank
United Stationers Inc.
Graphic Packaging Holding Company
), which retain a Zacks Rank #2 (Buy) while another peer
), carries a Zacks Rank #1 (Strong Buy).
AVERY DENNISON (AVY): Free Stock Analysis
GRAPHIC PKG HLD (GPK): Free Stock Analysis
QUAD GRAPHICS (QUAD): Free Stock Analysis
UTD STATIONERS (USTR): Free Stock Analysis
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