As I write this, shares of Avery Dennison Corp. (AVY) are rallying over 8% after the packaging materials company smashed expectations for the second quarter. After a bumpy few months, could this earnings report be what AVY needs to regain its footing? Let’s find out.
Chances are, you’ve probably heard of Avery Dennison. Its Avery self-adhesive labels can be found in most office supplies’ stores. But the company does a lot more than just that.
When you go to the grocery store, for example, you’ll find that many of your favorite products are packaged using Avery Dennison’s products. This includes your favorite foods, beverages, health, beauty and household products. Also, Avery Dennison’s Graphic Solutions division makes everything from custom car wraps to films that can transform a wall or window.
So it’s not surprising that since its humble beginnings in 1935, Avery Dennison has expanded operations globally. It now boasts more than 170 manufacturing and distribution facilities in over 50 countries worldwide. And the company brought in more than $6.6 billion in sales in 2017.
Judging from this morning’s earnings report, the company is on track to have an even better 2018. During the second quarter, net sales rose 14% year-on-year to $1.85 billion. This beat the $1.80 billion consensus estimate by 2.8%.
Meanwhile, adjusted earnings jumped 27% year-on-year to $1.66 per share. Analysts were expecting adjusted earnings of $1.55 per share, so Avery Dennison posted a 7.1% earnings surprise.
The company also updated its full-year outlook. Looking ahead to FY 2018, Avery Dennison is targeting adjusted earnings between $5.95 and $6.10 per share. This represents between 19% and 22% annual earnings growth. This revised guidance is also on the higher end of the Street view, which calls for $5.98 adjusted EPS.
Analysts are currently projecting that Avery Dennison will bring in $7.17 billion in revenue this year. Given these strong results, I wouldn’t be surprised if analysts revised their sales and earnings forecasts in the coming days.
I must also mention that AVY rewards shareholders with a 1.8% dividend yield. Last quarter, the company increased its quarterly dividend by 15.5% to $0.52 per share. It’ll likely declare its next quarterly dividend over the next few days.
In the meantime, I recommend AVY as a B-rated Buy, based on its Dividend Grader rating. I currently recommend AVY in my Growth Investor service, and we’re currently sitting on a nice 49% gain in this position.