Avery Dennison Corporation AVY is set to report first-quarter 2015 results on Apr 29. Last quarter, it posted a positive earnings surprise of 12.50%. The company has delivered an average positive earnings surprise of 4.08% over the past four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play
In 2014, Avery initiated a restructuring program, primarily related to the consolidation of certain European operations. The company anticipates approximately $49 million in annualized savings from these restructuring actions, of which approximately $14 million was realized in 2014 and the rest will be realized through 2016. With relentless focus on cost-cutting and portfolio optimization, Avery’s earnings growth trajectory should continue over the next few years.
Further, On Apr 23, Avery raised its quarterly dividend by 6% to 37 cents per share. The new dividend will be paid on Jun 17, 2015, to shareholders of record on Jun 3, 2015. Further share repurchases and dividend hikes are likely to improve investor sentiment.
However, weak market demand in North America continues to be a headwind for the Pressure-Sensitive Material segment. Moreover, demand in Europe remains soft reflecting economic challenges in the region. The Retail Branding Information Solutions segment is being affected by weakness in retail apparel demand in the U.S. Slowdown in China also remains a concern.
Earnings Whispers
Our proven model does not conclusively show that Avery is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 70 cents per share. Hence, the difference is of 0.00%.
Zacks Rank: Avery’s Zacks Rank #3 (Hold) when combined with 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies which, according to our model, have the right combination of elements to post an earnings beat this quarter:
The Babcock & Wilcox Company BWC with an Earnings ESP of +2.27% has a Zacks Rank #3.
TRI Pointe Homes, Inc. TPH has an earnings ESP of +30.00% and a Zacks Rank #2 (Buy).
Codexis, Inc. CDXS has an earnings ESP of +15.39% and a Zacks Rank #3.
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