Shares of Avery Dennison Corporation AVY scaled a new 52-week high of $72.64 on Mar 30, eventually closing the day’s trading at $72.40. The stock price appreciation came on the back of benefits expected from its strategy of achieving long-term targets.
This Pasadena, CA-based manufacturer of pressure-sensitive materials has a market cap of $6.5 billion. Meanwhile, average volume of shares traded over the last three months is approximately 1032K. Avery Dennison’s stock flaunts a one-year return of about 36.7% and a year-to-date return of around 15.5%. The company has outperformed the Zacks Consensus Estimate in each of the four trailing quarters with an average positive surprise of 8.21%.
Key Strengths
At a recent investor presentation, Avery Dennison highlighted its long-term strategy focused on innovation and differentiated quality and service to meet targets. The company aims to achieve double-digit adjusted EPS CAGR through 2018. Strong, consistent FCF with a solid balance sheet will also drive growth.
Notably, Avery Dennison’s PSM segment possesses healthy organic growth, diverse end markets, above-average returns on capital, and sustainable competitive advantages. The segment witnessed its fourth consecutive year of strong volume growth, above the high end of its long-term target. Performance was strong across all key products, events and regions, with above-average growth in targeted higher-value segments.
Further, Avery Dennison’s new strategy for Retail Branding and Information Solutions (“RBIS”) is focused on driving growth through a more regionally driven business model that is competitive, faster and less complex. The company is implementing a multi-year plan to streamline decision-making and eliminate management layers, while further consolidating its manufacturing footprint to reduce costs globally.
Moreover, Avery Dennison continues to invest in high-value segments to accelerate growth. With regard to PSM, the company is investing in capacity to support growth in the graphics business and optimizing its manufacturing footprint as well.
Further, the company is adding coding capacity in Asia to continue with solid growth in the region. Also, it is investing in information systems to drive supply chain productivity by upgrading systems in its North American materials business. In RBIS, major investments include capacity additions to aid rapid growth of RFID and heat transfer technology as well as projects to support a more cost-effective footprint.
At present, Avery Dennison retains a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same sector include Astec Industries, Inc. ASTE, Ball Corporation BLL and AptarGroup, Inc. ATR. All these stocks carry a Zacks Rank #2 (Buy).
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