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Avery Dennison Plans to Buy Hanita Coatings

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Sep. 12 2016, Updated 4:04 p.m. ET

Price movement

Avery Dennison (AVY) fell 3.6% to close at $75.33 per share during the first week of September 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.1%, -3.8%, and 22.2%, respectively, as of September 9. AVY is trading 2.6% below its 20-day moving average, 0.43% below its 50-day moving average, and 8.1% above its 200-day moving average.

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Related ETFs and peers

The Vanguard Materials ETF (VAW) invests 0.79% of its holdings in Avery Dennison. The ETF tracks a very broad market-cap-weighted index of US materials companies. The YTD price movement of VAW was 12.9% on September 9.

The Vanguard Mid-Cap Value ETF (VOE) invests 0.33% of its holdings in Avery Dennison. The ETF tracks the CRSP US Mid-Cap Value Index, which classifies value stocks based on five value factors. The market caps of Avery Dennison’s competitors are as follows:

  • 3M (MMM) — $106.6 billion
  • Bemis (BMS) — $4.8 billion

Latest news on Avery Dennison

In a press release on September 4, 2016, Reuters reported that “California-based Avery Dennison has agreed to buy Hanita Coatings from the Hanita kibbutz and the Tene investment fund for $75 million, the Calcalist financial news website said on Sunday.”

It added that “the company has signed a memorandum of understanding and is concluding its due diligence, after which it will pay $66 million. The remaining $9 million will be paid upon reaching certain milestones, Calcalist said.”

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Performance of Avery Dennison in 2Q16

Avery Dennison reported 2Q16 net sales of $1.54 billion, a rise of 1.7% over its net sales of $1.52 billion in 2Q15. Sales from the Pressure-Sensitive Materials and Vancive Medical Technologies segments rose 2.8% and 1.7%, respectively, and sales from the Retail Branding and Information Solutions segments fell 1.5% between 2Q15 and 2Q16.

The company’s gross profit margin rose 2.2%. Its net income and EPS (earnings per share) rose to $80.0 million and $0.88, respectively, in 2Q16, compared with $63.7 million and $0.68, respectively, in 2Q15.

AVY’s cash and cash equivalents fell 4.3% and its inventories rose 2.3% between 2Q15 and 2Q16. Its current ratio fell to 1.2x and its debt-to-equity ratio rose to 3.5x in fiscal 2Q16, compared with 1.3x and 3.0x, respectively, in 2Q15.

It reported non-GAAP (generally accepted accounting principles) free cash flow of $189.0 million in 2Q16, a rise of 41.9% over 2Q15. During 2Q16, the company repurchased 0.9 million of its shares, worth $64 million.

Avery Dennison reported that “in the second quarter, the company realized approximately $21 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $6 million, approximately two-thirds of which represented cash charges.”

Projections

The company projects that its EPS will be in the range of $3.35–$3.50 in 2016. It expects its adjusted EPS to be in the range of $3.80–$3.95, excluding $0.15 per share for restructuring charges and other items and $0.30 per share for non-cash charges to settle its 2016 US pension obligations. Next, we’ll discuss Monro Muffler Brake (MNRO).

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