Avery Dennison Corp.’s first-quarter earnings which will be published this week should be lower, just as they were last quarter.
And the company’s shares are also trending lower. Yet analysts still favor the Glendale labeler.
BMO Capital Markets Corp. analyst John McNulty, for example, rated the stock as an outperformer or a buy around the time of the company’s last quarterly earnings report on Feb. 2, when it reported. reported adjusted net earnings equal to $2.13 per share, down from $2.27. at the same time a year earlier.
Revenue, however, rose 10% to $2.2 billion. And McNulty wrote that despite supply chain issues and higher costs, some segments of the business saw significant growth that “helped offset temporary headwinds.”
Matthew Miller, an equity analyst at CFRA, wrote in a research report this month that Avery Dennison was expected to have a good year and that he predicted 10% growth for the company.
“During the Covid-19-related shutdowns, demand for tags and labels for the apparel industry was a major drag on growth, but rebounded strongly,” Miller wrote. The company’s labels and graphic materials business “benefited from strong demand for food, hygiene and pharmaceutical labeling and information labeling related to e-commerce”.
Miller also rated the stock a buy, driven by his view of Avery’s resilient business model and its prospects for free cash flow growth, despite risks from global economic growth.
He believes the company has a strong competitive advantage in many of its markets, he said in the report.
“Long-term growth is expected to be driven by expanding pressure-sensitive label market and continued penetration into emerging markets,” Miller wrote. “We expect strong growth in the RFID (smart tag) market (continued strength in apparel and new market penetration) and expect AVY to benefit from margin expansion (long term) thanks to higher prices and a better product mix.”
Out of stock
However, the stock tends to fall.
In the 52 weeks ending April 20, Avery Dennison shares lost approximately 14% of their value. During the same period, the S&P 500 index gained almost 8%. The stock closed at $171.08 on April 20.
Additionally, the company is expected to report lower earnings on April 26, at least according to Zacks Investment Research.
On April 19, Zacks said the consensus among analysts who follow the manufacturer is that the company will report earnings per share of $2.18 for the quarter ending March. This is a decrease of 9% from the same period a year earlier, when revenues were $2.40.
“Revenue is expected to be $2.3 billion, up 12% from the prior year quarter,” Zacks said.
The equity research firm uses a proprietary model that relies in part on information from analysts who cover a company.
But, again, the company is rated positively by Zacks.
“On the other hand, the stock currently carries a Zacks rank of No. 3 (or a hold),” Zacks said.
He went on to explain that his system attempts to assess the likelihood of a company exceeding earnings expectations. Over the past four quarters, Avery Dennison had beaten consensus EPS estimates three times.
“Avery Dennison doesn’t seem like a compelling candidate to beat earnings,” Zacks’ story concluded. “However, investors should also pay attention to other factors, whether to bet on this stock or walk away from it before its earnings release.”