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Avery Dennison (AVY) Q1 Earnings & Sales Beat Estimates


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Avery Dennison Corporation AVY reported adjusted earnings of $1.44 per share in first-quarter 2018, which surged around 30% year over year. Earnings also beat the Zacks Consensus Estimate of $1.34. The year-over-year improvement was mainly driven by strong operating results, currency translation tailwinds and a lower tax rate.

Including one-time items, the company reported earnings of $1.40 per share in the quarter, up 12% from $1.25 per share recorded in the prior-year quarter.

Total revenues jumped around 13% to $1.78 billion from $1.57 billion witnessed in the year-earlier quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $1.76 billion. On an organic basis, sales were up nearly 3.4% year over year.

Avery Dennison Corporation Price, Consensus and EPS Surprise

Avery Dennison Corporation Price, Consensus and EPS Surprise | Avery Dennison Corporation Quote

Cost of sales in the first quarter went up 14.5% year over year to $1.29 billion. Gross profit increased around 9.3% year over year to $483 million, while gross margin contracted 100 basis points (bps) to 27%.

Marketing, general and administrative expenses came in at $295 million compared with $280 million reported in the year-ago quarter. Adjusted operating profit advanced 15.9% year over year to $188 million. Adjusted operating margin expanded 30 bps on a year-over-year basis to 10.6%.

Segmental Performance

Revenues from the Label and Graphic Materials (LGM) segment climbed around 12% year over year to $1,218 million. On an organic basis, sales grew around 3.6%. Adjusted operating profit rose 12.8% to $158 million from $140 million reported in the comparable period last year.

Revenues from the Retail Branding and Information Solutions segment were up 5.2% to $386 million from $367 million recorded in the year-earlier quarter. On an organic basis, sales grew more than 3%. The segment's adjusted operating income improved around 27% to $39.4 million.

The Industrial and Healthcare Materials segment reported net sales of $172 million, up 49% from $116 million recorded in the prior-year quarter. The segment reported adjusted operating income of $13 million compared to operating profit of $14 million recorded in the year-ago period.

Financial Updates

Avery Dennison had cash and cash equivalents of $188 million at the end of the first quarter, down from $295 million reported at the end of the year-ago quarter. The company generated $16 million in cash from operating activities during the quarter compared with $14 million recorded in the prior-year period.

Avery Dennison's long-term debt increased to $1,343 million as of Mar 31, 2018, compared with $1,250 million as of Apr 1, 2017.

During the first quarter, Avery Dennison repurchased 0.4 million shares for a total cost of $52 million. The company's share count decreased 0.2 million in the reported quarter.

Cost-Reduction Activities

Avery Dennison realized approximately $11 million in pre-tax savings from restructuring in the first quarter. The company incurred restructuring charges of approximately $13 million.

It approved a restructuring plan comprising the consolidation of the European footprint of its LGM segment. The plan, which is expected to complete by the end of 2019, will reduce the company's workforce by about 150 positions.

Avery Dennison estimated total pretax restructuring charges of around $70 million associated with the plan. Of these charges, $6.9 million represents non-cash asset impairment charges, all of which were recorded in the first quarter of 2018. The remaining charges will largely be recognized during second-quarter 2018, while the majority of the cash payments associated with these accruals will be made in 2019.

The company expects to realize approximately $25 million in annualized savings from this plan, beginning in 2020.

Guidance

For 2018, Avery Dennison raised its adjusted earnings per share guidance to $5.85-$6.05 from $5.70-$5.95. The company is poised to benefit from the restructuring plan associated with the consolidation of LGM's European footprint, designed to further enhance its competitive position in the region.

Share Price Performance

Over the past year, Avery Dennison has outperformed its industry with respect to price performance. The stock has rallied 27%, while the industry recorded growth of 22% during the same time frame.



Zacks Rank & Key Picks

Avery Dennison currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same sector include Alarm.com Holdings, Inc. ALRM , H&E Equipment Services, Inc. HEES and Caterpillar Inc. CAT . While Alarm.com and H&E Equipment Services sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Alarm.com has a long-term earnings growth rate of 15.6%. The stock has appreciated 26% in a year's time.

H&E Equipment Services has a long-term earnings growth rate of 14.4%. The company's shares have been up 60% over the past year.

Caterpillar has a long-term earnings growth rate of 12%. Its shares have rallied 38% in the past year.

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CAT , HEES , AVY , ALRM



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