On Mar 20, we issued an updated research report on Avery Dennison Corporation AVY, a producer of pressure-sensitive materials, and variety of tickets, tags, labels and other converted products.
Avery Dennison reported fourth-quarter 2014 earnings of 90 cents per share, a 30% improvement year over year, driven by cost saving initiatives.
Avery initiated a new restructuring program in 2014, primarily related to the consolidation of certain European operations. The company anticipates approximately $49 million in annualized savings from these restructuring actions, of which nearly $14 million was realized in 2014 and the rest will be realized through 2016. Combining carryover benefits from 2014 with new actions taken in 2015, Avery estimates that restructuring initiatives will contribute roughly $60 million pre-tax or about 45 cents a share in 2015.
Avery Dennison expects adjusted earnings per share to range between $3.20 and $3.40 in 2015. Management expects growth of 3% to 9% from 2014, despite significant headwind from currency translation.
Currently, 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. Furthermore, the strength exhibited by European retailers & brands during most of 2014 slowed down in the fourth quarter.
Nevertheless, the scenario will turn positive over the next few years. For the Pressure-Sensitive Materials segment, Avery Dennison targets 4–5% organic sales growth in the range of 4% to 5% by 2018, aided by market share gains, progress in the emerging markets, accelerated growth in graphics, and performance tapes and innovation-led advancement in label and packaging material. The Retail Branding and Information Solutions segment is expected to deliver organic sales growth in the range of 4% to 5% by 2018, outperforming the industry growth rate of 1to 2% on the back of product introductions and growth in RFID (radiofrequency identification).
Overall, Avery Dennison expects to progress consistently through 2018 and projects organic sales growth in the range of 4% to 5%. Operating margin is expected to range between 9% and 10%, while adjusted EPS growth will be in the range of 12% to 15%.
Avery Dennison currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the industrial products sector include Landauer Inc. LDR, Perma-Fix Environmental Services Inc. PESI and Sharps Compliance Corp. SMED. While Landauer and Perma-Fix sport a Zacks Rank #1 (Strong Buy), Sharps Compliance carries a Zacks Rank #2 (Buy).
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