Avery Dennison Faces Challenges Despite Potential for Growth
Mentor, Ohio-based Avery Dennison Corporation (AVY) specializes in pressure-sensitive materials, tickets, tags, labels, and other converted products. The company boasts a market capitalization of $16.5 billion and operates across the U.S., Europe, the Middle East, North Africa, Asia, and Latin America.
Stock Performance Underwhelms Against Major Indices
Avery Dennison has significantly underperformed compared to the broader market in the past year. The stock gained only 1.5% year-to-date and 7.8% over the last 52 weeks. In contrast, the S&P 500 Index ($SPX) saw a notable increase of 25.8% in 2024 and 31.8% in the past year.
When looking at sector-specific performance, AVY lagged behind the Consumer Discretionary Select Sector SPDR Fund (XLY), which surged 23.1% in 2024 and 30.6% over the past year.
Q3 Earnings Report Sparks Stock Decline
Avery Dennison’s stock fell 2.2% following its Q3 earnings release on October 23. The company reported $2.2 billion in net sales, reflecting a 4.1% year-over-year growth, but missed analyst expectations slightly, which contributed to the drop in stock prices.
On a brighter note, both the Materials and Solutions Groups demonstrated strong profitability growth. Thanks to increased volume and productivity, Avery’s adjusted earnings per share (EPS) grew by an impressive 9.4% from the previous year, reaching $2.33 and exceeding analysts’ forecasts. Additionally, its Intelligent Label Solutions division continued its robust growth, especially in the food sector, as its technology addresses key industry challenges.
Positive Outlook for Upcoming Fiscal Year
Looking ahead, analysts project that Avery Dennison will report an exceptional 19.2% year-over-year growth in adjusted EPS, anticipating it to hit $9.42 by the end of the current fiscal year in December. The company also has a strong track record, having met or exceeded analysts’ bottom-line estimates in the past four quarters.
The stock enjoys a “Moderate Buy” consensus rating among analysts, with 12 experts covering it; seven recommend a “Strong Buy,” one a “Moderate Buy,” and four suggest a “Hold” rating.
Analyst Ratings Reflect Growing Confidence
This rating setup represents a slight improvement compared to two months ago when six analysts endorsed a “Strong Buy” and one favored a “Moderate Sell” rating.
On November 18, Truist Financial Corporation (TFC) analyst Keith Hughes reiterated a “Buy” rating for the stock. Currently, the average price target for AVY is $240.96, indicating a 17.5% premium over current levels. The most optimistic target from analysts reaches $274.60, suggesting a potential upside of 33.9%.
On the date of publication, Aditya Sarawgi did not hold (either directly or indirectly) stakes in any of the securities mentioned in this article. Information and data in this article are provided solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
