Avery Dennison Corporation
) reported adjusted earnings of 53 cents per share in the
third-quarter 2012, a 77% rise from the 30 cents per share
delivered in the year-ago quarter; beating the Zacks Consensus
Estimate of 45 cents.
Including restructuring costs and other items, earnings from
continuing operations were 37 cents per share in the quarter
compared with 33 cents in the year-ago quarter.
Total revenues dipped 0.8% to $1.488 billion from $1.500
billion in the prior-year quarter. Revenues were ahead of the
Zacks Consensus Estimate of $1.487 billion.
Cost of sales for the reported quarter fell 3.3% to $1.096
billion. Gross profit increased 7.1% to $392 million from $366.9
million in the prior-year quarter.
Marketing, general & administrative expenses were $293.9
million versus $285 million in the year-ago quarter. Adjusted
operating income from continuing operations increased to $98.1
million from $81.9 million in the year-earlier quarter. Operating
margin expanded 110 basis points (bps) to 6.6% in the
Total revenues in the
segment fell 1.3% to $982.9 million. Adjusted operating profit
increased 4.4% to $85.8 million in the quarter. Operating margin
contracted 30 bps to 7.4%, driven by employee related expenses,
effects of product-mix and higher restructuring costs, partially
offset by higher volumes and productivity initiatives.
Total revenues from
Retail Branding and Information Solutions
increased 3.7% to $374.2 million from $360.7 million in the
year-earlier quarter. Segmental adjusted operating income
increased 33.6% to $15.9 million with adjusted operating margin
expanding 90 bps to 4.2% due to productivity initiatives, higher
volumes, lower restructuring charges, partially offset by
employee related expenses and effects of product-mix.
Other specialty converting businesses
segment reported net sales of $130.7 million, down 9% from $144.2
million in the year-ago quarter. Adjusted operating profit was
$5.5 million compared with a loss of $1.1 million in the
prior-year quarter. Adjusted operating margin jumped 500 basis
points to 4.2% in the quarter due to RFID profitability,
partially offset by higher restructuring costs.
As of September 29, 2012, cash and cash equivalents of the
company were $190.7 million versus $119.7 million as of October
1, 2011. Long-term debt decreased to $702.7 million as of
September 29, 2012, from $954.5 million as of October 1,
Cash flow from operating activities was $214.1 million in the
first nine months of fiscal 2012 compared with $120 million of
cash used in operating activities in the first nine months of
fiscal 2011. Avery repurchased 2.9 million shares during the
quarter at an aggregate cost of $86 million.
The company has raised its adjusted earnings guidance to a
range of $2.00 to $2.05 per share from the earlier guidance range
of $1.90 to $2.05 from $1.80. Free cash flow from continuing
operations is expected to lie between $280 million and $310
million in 2012.
Avery is spending on restructuring activities to achieve more
than $100 million in annualized savings from mid-2013. However,
the activities being capital intensive will pressure margins in
the upcoming quarters.
Avery retains a short-term Zacks #4 Rank (Sell). We have a
long-term Underperform recommendation on the stock.
AVERY DENNISON (AVY): Free Stock Analysis
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