Avery Dennison (AVY) Q3 Earnings Up Y/Y, Beat Estimates
Avery Dennison Corporation (AVY) reported adjusted earnings of 77 cents per share in the third quarter of 2014, up 11.6% from 69 cents earned in the year-ago quarter. The results beat the Zacks Consensus Estimate of 74 cents.
Including restructuring costs and other items, earnings from continuing operations were 68 cents per share in the quarter, compared with 62 cents in the year-ago quarter.
Total revenue increased 4% to $1.56 billion from $1.50 billion in the prior-year quarter, surpassing the Zacks Consensus Estimate of $1.55 billion. On an organic basis, sales grew 3% year on year.
Cost of sales in the reported quarter rose 5.1% year over year to $1.16 billion. Gross profit inched down 0.4% to $400.7 million from $402.2 million in the prior-year quarter. Gross margin contracted 100 basis points (bps) to 25.7%.
Marketing, general and administrative expenses were $276 million versus $285.7 million in the year-ago quarter. Adjusted operating profit increased 6.8% to $124.4 million. Adjusted operating margin improved 30 bps to 8% on a year-over-year basis.
Segmental Performance
Total revenue in the Pressure-sensitive Materials segment increased 6% to $1.16 billion. Label and Packaging Materials sales rose in the mid-single digits. Sales for Graphics, Reflective and Performance Tapes also increased in the mid-single digits. Adjusted operating profit increased 3% to $118.7 million in the quarter compared with $115 million in the year-ago quarter.
Total revenue from Retail Branding and Information Solutions segment declined 2% to $383.9 million from $391.4 million in the year-earlier quarter due to decreased demand from U.S. based retailers and brands. The segment’s adjusted operating income rose 12.2% to $25.8 million.
Vancive Medical Technologies segment reported net sales of $18.7 million, down 4% from $19.5 million in the year-ago quarter. The segment reported an adjusted operating loss of $2.8 million, wider than the year-ago quarter loss of $0.6 million.
Financial Updates
As of Sep 27, 2014, cash and cash equivalents were $195.6 million, down from $309.6 million as of Sep 28, 2013. Cash provided by operating activities for the period of nine months ended Sep 27, 2014 was $200 million compared with $95.7 million in the year-ago period.
Long-term debt of the company decreased to $945 million as of Sep 27, 2014 from $950.9 million as of Sep 28, 2013. Debt-to-capitalization ratio increased to 46% as of Sep 27, 2014 from 40.4% as of Sep 28, 2013. The company repurchased 5 million shares in the third quarter at an aggregate cost of $247 million.
Cost Reduction Activities
In the third quarter, the company realized approximately $7 million of savings from restructuring, while incurring restructuring costs of around $7 million.
Fiscal 2014 Outlook
Avery trimmed the upper end of its 2014 adjusted earnings per share outlook, which was previously projected in the $3.00—$3.10 band, to range between $3.00—$3.05. Including an estimated cost of $0.40 per share for restructuring and other items, the company lowered earnings its guidance in the range of $2.60—$2.65 from $2.65—$2.75 per share.
Pasadena, CA-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). However, other better-ranked stocks worth a look in the industrial products sector include United Stationers Inc. (USTR), Advanced Emissions Solutions, Inc. (ADES) and Alamo Group, Inc. (ALG). All these stocks carry a Zacks Rank #2 (Buy).
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