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Avery Dennison (AVY) Q4 Earnings Miss Estimates on Low Volumes
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Avery Dennison Corporation (AVY - Free Report) delivered adjusted earnings of $1.65 per share in fourth-quarter 2022, missing the Zacks Consensus Estimate of $2.10. The bottom line also marked a 23% decline year over year. Volume declines in the quarter due to significant inventory reductions by the customers resulted in weaker-than-expected results.
Including one-time items, the company reported earnings per share (EPS) of $1.51 compared with the year-ago quarter’s $2.19 per share.
Total revenues declined 7% year over year to $2.03 billion, missing the Zacks Consensus Estimate of $2.21 billion. Volumes were down double digits in Apparel, Materials Europe and Materials North America due to significant inventory destocking. Higher prices somewhat offset the impact.
Avery Dennison Corporation Price, Consensus and EPS Surprise
The cost of sales in the quarter dipped 4.5% year over year to $1,526 million. The gross profit declined 14.5% year over year to $500 million.
Marketing, general and administrative expenses were $312 million compared with the $332 million incurred in the year-ago quarter. The adjusted operating profit was around $188 million compared with the prior-year quarter’s $253 million. The adjusted operating margin was 9.3%, a 230 basis point contraction from the year-ago quarter.
Segment Highlights
AVY has combined the Label and Graphic Materials segment and the Industrial and Healthcare Materials segment into the Materials Group. It has renamed the Retail Branding and Information Solutions segment as Solutions Group.
Revenues in the Materials Group segment declined 5.4% year over year to $1,441 million in the reported quarter. On an organic basis, sales were up 2.2%. On an organic basis, sales were up low-single digits in were up by Label Materials, Graphics and Reflective Solutions businesses and in the combined Performance Tapes and Medical businesses. The segment’s adjusted operating profit fell 18% year on year to $150 million.
Revenues in the Solutions Group were down 11.3% year over year to $585 million. On an organic basis, sales declined 7.7% and high-value category sales were up mid-single digits. Sales decreased in the high-teens in base solutions, as customers adjusted inventory levels. The segment’s adjusted operating income slumped 40% year over year to $53 million.
Financial Updates
The company returned $618 million in cash to shareholders through share repurchases and dividend payments in 2022 and also invested $40 million in acquisitions. AVY repurchased 2.2 million shares throughout the year.
Avery Dennison ended 2022 with cash and cash equivalents of $167 million compared with $163 million at the end of the prior year. The company’s long-term debt was $2,504 million at the end of 2022, down from $2,786 million at the end of 2021. The company’s net debt to adjusted EBITDA ratio was 2.2.
AVY realized approximately $26 million in pre-tax savings from restructuring (net of transition costs) in 2022. The company also incurred pre-tax restructuring charges of around $8 million. For 2023, the company projects incremental savings of around $45 million from its restructuring actions.
2022 Performance
Adjusted EPS increased 3% year over year to $9.15 in 2022, but missed the Zacks Consensus Estimate of $9.60. Including one-time items, EPS was $9.21 in 2022, up 4% from the figure of $8.83 reported in 2021.
Total revenues rose 7% year over year to $9.04 billion. The top line figure lagged the Zacks Consensus Estimate of $9.22 billion.
Guidance for 2023
Avery Dennison expects adjusted EPS for 2023 in the band of $9.15 to $9.55. The midpoint of the range indicates year-over-year growth of 2%. AVY has projected organic sales growth of 1% to 5% for the year and reported sales growth at 0%-4%. An unfavorable currency impact is anticipated at 1% for the year. The company expects inventory destocking to continue in the first quarter of 2023.
Price Performance
Image Source: Zacks Investment Research
Shares of AVY have declined 0.7% in the past year compared with the industry’s 1.9% fall.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #4 (Sell).
KnowBe4’s earnings surprise in the last four quarters was 216.7%, on average. The Zacks Consensus Estimate for the company’s 2022 earnings is pegged at 24 cents, indicating a year-over-year increase of 127.3%. The consensus estimate for 2022 earnings has moved up 9% in the past 60 days. KNBE’s shares have gained 4% in a year.
Tenaris has an average trailing four-quarter earnings surprise of 20.9%. The Zacks Consensus Estimate for TS’ 2022 earnings is pegged at $4.38 per share. This indicates a 134.2% increase from the prior-year reported figure. The consensus estimate for 2022 earnings has moved north by 2.1% in the past 60 days. Its shares gained 36.9% in the last year.
The Zacks Consensus Estimate for Deere & Company’s fiscal 2023 earnings per share is pegged at $28.01, suggesting an increase of 19.6% from that reported in the last year. The consensus estimate for fiscal 2023 earnings has moved 2.7% upward in the last 60 days. DE has a trailing four-quarter average earnings surprise of 7.1%. Its shares gained 11.7% in the last year.
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Avery Dennison (AVY) Q4 Earnings Miss Estimates on Low Volumes
Avery Dennison Corporation (AVY - Free Report) delivered adjusted earnings of $1.65 per share in fourth-quarter 2022, missing the Zacks Consensus Estimate of $2.10. The bottom line also marked a 23% decline year over year. Volume declines in the quarter due to significant inventory reductions by the customers resulted in weaker-than-expected results.
Including one-time items, the company reported earnings per share (EPS) of $1.51 compared with the year-ago quarter’s $2.19 per share.
Total revenues declined 7% year over year to $2.03 billion, missing the Zacks Consensus Estimate of $2.21 billion. Volumes were down double digits in Apparel, Materials Europe and Materials North America due to significant inventory destocking. Higher prices somewhat offset the impact.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation price-consensus-eps-surprise-chart | Avery Dennison Corporation Quote
The cost of sales in the quarter dipped 4.5% year over year to $1,526 million. The gross profit declined 14.5% year over year to $500 million.
Marketing, general and administrative expenses were $312 million compared with the $332 million incurred in the year-ago quarter. The adjusted operating profit was around $188 million compared with the prior-year quarter’s $253 million. The adjusted operating margin was 9.3%, a 230 basis point contraction from the year-ago quarter.
Segment Highlights
AVY has combined the Label and Graphic Materials segment and the Industrial and Healthcare Materials segment into the Materials Group. It has renamed the Retail Branding and Information Solutions segment as Solutions Group.
Revenues in the Materials Group segment declined 5.4% year over year to $1,441 million in the reported quarter. On an organic basis, sales were up 2.2%. On an organic basis, sales were up low-single digits in were up by Label Materials, Graphics and Reflective Solutions businesses and in the combined Performance Tapes and Medical businesses. The segment’s adjusted operating profit fell 18% year on year to $150 million.
Revenues in the Solutions Group were down 11.3% year over year to $585 million. On an organic basis, sales declined 7.7% and high-value category sales were up mid-single digits. Sales decreased in the high-teens in base solutions, as customers adjusted inventory levels. The segment’s adjusted operating income slumped 40% year over year to $53 million.
Financial Updates
The company returned $618 million in cash to shareholders through share repurchases and dividend payments in 2022 and also invested $40 million in acquisitions. AVY repurchased 2.2 million shares throughout the year.
Avery Dennison ended 2022 with cash and cash equivalents of $167 million compared with $163 million at the end of the prior year. The company’s long-term debt was $2,504 million at the end of 2022, down from $2,786 million at the end of 2021. The company’s net debt to adjusted EBITDA ratio was 2.2.
AVY realized approximately $26 million in pre-tax savings from restructuring (net of transition costs) in 2022. The company also incurred pre-tax restructuring charges of around $8 million. For 2023, the company projects incremental savings of around $45 million from its restructuring actions.
2022 Performance
Adjusted EPS increased 3% year over year to $9.15 in 2022, but missed the Zacks Consensus Estimate of $9.60. Including one-time items, EPS was $9.21 in 2022, up 4% from the figure of $8.83 reported in 2021.
Total revenues rose 7% year over year to $9.04 billion. The top line figure lagged the Zacks Consensus Estimate of $9.22 billion.
Guidance for 2023
Avery Dennison expects adjusted EPS for 2023 in the band of $9.15 to $9.55. The midpoint of the range indicates year-over-year growth of 2%. AVY has projected organic sales growth of 1% to 5% for the year and reported sales growth at 0%-4%. An unfavorable currency impact is anticipated at 1% for the year. The company expects inventory destocking to continue in the first quarter of 2023.
Price Performance
Image Source: Zacks Investment Research
Shares of AVY have declined 0.7% in the past year compared with the industry’s 1.9% fall.
Zacks Rank and Stocks to Consider
Avery Dennison currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Industrial Products sector are KnowBe4, Inc. , Tenaris (TS - Free Report) , and Deere & Company (DE - Free Report) . KNBE and TS sport a Zacks Rank #1 (Strong Buy) at present and DE has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KnowBe4’s earnings surprise in the last four quarters was 216.7%, on average. The Zacks Consensus Estimate for the company’s 2022 earnings is pegged at 24 cents, indicating a year-over-year increase of 127.3%. The consensus estimate for 2022 earnings has moved up 9% in the past 60 days. KNBE’s shares have gained 4% in a year.
Tenaris has an average trailing four-quarter earnings surprise of 20.9%. The Zacks Consensus Estimate for TS’ 2022 earnings is pegged at $4.38 per share. This indicates a 134.2% increase from the prior-year reported figure. The consensus estimate for 2022 earnings has moved north by 2.1% in the past 60 days. Its shares gained 36.9% in the last year.
The Zacks Consensus Estimate for Deere & Company’s fiscal 2023 earnings per share is pegged at $28.01, suggesting an increase of 19.6% from that reported in the last year. The consensus estimate for fiscal 2023 earnings has moved 2.7% upward in the last 60 days. DE has a trailing four-quarter average earnings surprise of 7.1%. Its shares gained 11.7% in the last year.