Credit: Shutterstock photoAvery Dennison CorporationAVY stock looks promising at the moment. We are optimistic about the company's prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let's delve deeper in to the factors that make this producer of pressure-sensitive materials an attractive investment option.
What's Working in Favor of Avery Dennison?
Solid Rank: Avery Dennison currently carries a Zacks Rank #2 (Buy). Going by the Zacks model, companies carrying a Zacks Rank #2 have chances of performing better than the broader market in the quarters ahead. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
An Outperformer: Avery Dennison's shares climbed 24% in the past one year, outperforming the Zacks categorized Office Supplies & Forms sub industry's growth of 21.4%.
Strong Q1, Upbeat Guidance: Avery Dennison reported adjusted earnings of $1.11 per share in first-quarter 2017, which climbed 18% from 94 cents recorded in the year-ago quarter. For 2017, the company raised adjusted earnings per share guidance range to $4.50-$4.65 from the prior band of $4.30-$4.50, reflecting stronger operating outlook and lower expected full-year tax rate. It anticipates organic sales growth of 3.5-4.5% for the full year, reflecting solid results in the first quarter. Further, the company expects to deliver its sixth consecutive year of a double-digit increase in EPS and solid organic sales growth.
Positive Earnings Surprise History: Avery Dennison topped the Zacks Consensus Estimate in the last reported quarter, recording a positive surprise of 6.73%. In the trailing four quarters, the company posted an average positive earnings surprise of 5.53%.
Positive Growth Projections: The Zacks Consensus Estimate for earnings is $4.58 for fiscal 2017 which reflects a year-over-year growth of 13.93%. For fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $4.99, year-over-year growth of 8.88%.
Avery Dennison has long-term expected earnings per share growth of 7%.
Growth Drivers in Place: Avery Dennison's Label and Graphic Materials segment continues to deliver strong margins on the back of 5% organic growth. This group is the company's largest and highest-return business. In the past four years, the business has consistently generated organic growth within its targeted range of 4-5%. The new Industrial and Healthcare Materials segment will return to a solid growth trajectory by the middle of the year when the bulk of the headwinds in healthcare will be over.
Avery Dennison witnessed volumes increase across customer categories over the last few quarters despite a difficult retail apparel market, demonstrating early success of its multi-year transformation strategy. The company's effort to reduce complexity as well as focus on cost structure, and use lower-cost locally sourced materials will support more competitive pricing.
The company will continue to increase the pace of investment to leverage specialty labels, graphics, and reflective solutions business, as demonstrated by the acquisitions of Mactac Europe, Hanita Coatings, and Ink Mill, as well as its investment to expand the plant in Luxembourg. Further, Avery Dennison has agreed to acquire Yongle Tape Company Ltd., a manufacturer of specialty tapes and related products used in a variety of industrial markets, including the global automotive industry. Additionally, it has acquired Longford, Ireland-based Finesse Medical, a maker of materials used for wound care and skin treatments. Finesse Medical's product portfolio of silicone gels and polyurethane foam dressings will complement Avery Dennison's products in wound care. Further, its converting and packaging capabilities will enable the company to offer expanded manufacturing services to customers.
Other Stocks to Consider
Other top-ranked stocks worth considering in the same sector are AGCO Corp. AGCO , Deere & Company DE and Lakeland Industries, Inc. LAKE . All three stocks flaunt a Zacks Rank #1.
AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters. Deere generated an average positive earnings surprise of 70.41% in the last four quarters, while Lakeland Industries has an average positive earnings surprise of 49.26% in the preceding four quarters.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
