AVY
Avery Dennison Corp
Industrial/Transportation
08/12/2016
Presented
| Date | 08/10/2016 |
| Price | $78.69 |
| Market Cap | $7.14B |
| Ent Value | $7.51B |
| P/E Ratio | 23.48x |
| Book Value | $10.76 |
| Div Yield | 0.02% |
| Shares O/S | 90.70M |
| Ave Daily Vol | 730,099 |
| Short Int | 4.37% |
Current
| Price | $219.88 |
| Market Cap | $17.70B |
| Avery Dennison Corp. engages in the provision of labeling and packaging materials and solutions. It businesses include the production of pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. The company operates its business through three segments: Pressure-Sensitive Materials, Retail Branding and Information Solutions, and Vancive Medical Technologies. The Pressure-Sensitive Materials segment provides pressure-sensitive labeling technology and materials, films for graphic and reflective applications, performance polymers, and specialty tapes. The Retail Branding and Information Solutions segment designs, manufactures, and sells brand and price tickets, tags and labels, and related services, supplies, and equipment. The Vancive Medical Technologies segment manufactures pressure-sensitive adhesive products for surgical, wound care, ostomy, and electro medical applications. The company was founded by R. Stanton Avery in 1935 and is headquartered in Glendale, CA. |
Publicly traded companies mentioned herein: 3M Co (MMM), Avery Dennison Corp (AVY), UPM-Kymmene OYJ (UPM1V FH)
Highlights
The presenter is short shares of Avery Dennison (AVY) at ~$79 (just under its 52-week high), and said he thinks the timing and risk/ reward are favorable. In 2011 when “everything was going wrong” the manufacturer and distributor of pressure-sensitive materials, tags, labels, etc. looked to be facing secular headwinds; however, “management has executed well over the past five years, divesting assets and restructuring the business to get the company on stable ground”. The trouble AVY faces today is more subtle than the secular risks seen in 2011, but could result in meaningful downside for shareholders. In his opinion, the stock is expensive at just over 18x 2017 EPS estimates ($4.30) and the margin benefits AVY has seen due to lower raw material costs (not productivity and cost cutting, as management claims) will abate and lead to push back from customers on pricing. At the same time, organic growth may slow and difficult comps over coming quarters should limit upside risk. If his bearish view plays out as expected, earnings will fall short of Street estimates by ~15%, and applying a mid-teens multiple to his $3.75/ share earnings forecast suggests the stock would be more fairly valued in the $50s.
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