Avery Dennison Corporation (NYSE:AVY) remains poised for growth, backed by focus on pricing actions, restructuring activities and an encouraging 2019 outlook. However, its performance will be affected by a lackluster China automotive market and negative impact of currency translation.
The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, resulting in an average positive earnings surprise of 2.11%. It has an estimated long-term earnings growth rate of 8.30%.
The company currently carries a Zacks Rank #3 (Hold) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities.
Below, we briefly discuss the company’s potential growth drivers and possible headwinds.
Factors Favoring Avery Dennison
Avery Dennison’s strong presence in emerging markets, acquisitions and organic growth drove the company’s earnings during the March-end quarter. The company continues to register stellar top-line growth, margin expansion and earnings improvement. In sync with this, the company maintained its adjusted earnings per share guidance of $6.45-6.70 for 2019, reflecting growth of 6-11% over the $6.06 earned in 2018.
For the current year, including the impact of the pension-settlement charge, Avery Dennison raised its earnings per share guidance to $3.10-$3.35 from the prior view of $2.70-$2.95, due to lower-than-expected pension-settlement charges.
Positive Growth Projections
The Zacks Consensus Estimate for Avery Dennison’s 2019 EPS is currently pegged at $6.55, reflecting projected year-over-year growth of 8.09%. The same for 2020 is pinned at $7.16, indicating a year-over-year rise of 9.2%.
Avery Dennison’s trailing 12-month EV/EBITDA ratio is 9.8, while the industry's average trailing 12-month EV/EBITDA is 12.7. Consequently, the stock is cheaper at this point based on the ratio.
Return on Equity (ROE)
Avery Dennison’s trailing 12-month ROE of 54.3% reinforces its growth potential. The company’s ROE is higher than the ROE of 24.3% for the industry, highlighting its efficiency in utilizing shareholders’ funds.
Over the past year, Avery Dennison’s shares have gained 14.5%, outperforming the industry’s growth of 5.9%.
Avery Dennison Corporation Price and Consensus
Stocks to Consider
A few better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (NYSE:GPK) , Roper Technologies, Inc. (NYSE:ROP) and Valmont Industries, Inc. (NYSE:VMI) , each sporting a Zacks Rank #1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 4.9% for the ongoing year. The company’s shares have gained 0.7% over the past month.
Roper Technologies has an expected earnings growth rate of 9.4% for the current year. The stock has appreciated 2.5% in the past month.
Valmont Industries has a projected earnings growth rate of 12.6% for 2019. The stock has gained 7% in a month’s time.
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