Avery Dennison Profit Falls, Yet Tops Estimates; Stock Up - Update

(RTTNews) - Labeling and packaging materials company Avery Dennison Corp. (AVY), Friday reported a lower third-quarter profit, hurt by expenses related to the sale of its Office and Consumer Products and Designed and Engineered Solutions businesses.

Sales for the quarter meanwhile climbed four percent on growth at its Pressure-sensitive Materials and Retail Branding and Information Solutions segments. The company's earnings for the quarter topped Wall Street estimates.

Looking ahead, Avery Dennison lifted the lower end of its adjusted earnings guidance for 2013, which excludes higher-than-expected restructuring and other charges.

Investors cheered the announcement, sending Avery Dennison shares up by about 8 percent on the New York Stock Exchange.

Pasadena, California-based Avery Dennison reported third-quarter net income of $37 million or $0.37 per share compared with $58 million or $0.57 per share last year.

Results for the quarter included loss from discontinued operations of $0.25 per share mainly related to the sale of its OCP and DES businesses.

Excluding items, adjusted earnings from continuing operations for the third quarter were $0.69 per share compared with $0.51 per share a year ago.

On average, seven analysts polled by Thomson Reuters expected earnings of $0.64 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter climbed to $1.505 billion from $1.447 billion in the prior year. Five analysts had a consensus revenue estimate of $1.51 billion for the quarter.

Sales at Pressure-sensitive Materials segment rose 4 percent with Label and Packaging Materials sales growth in low single digits. Sales for Graphics, Reflective, and Performance Tapes rose mid-single digits. Operating margin at the segment was up 220 basis points on productivity initiatives, lower restructuring costs and higher volume.

Retail Branding and Information Solutions gained 4 percent on demand from European retailers and brands while margin fell 20 basis points due to restructuring costs.

"Both of our core businesses are delivering solid sales growth, as well as outstanding operating margin expansion," said CEO Dean Scarborough.

For 2013, Avery Dennison now expects adjusted earnings from continuing operations of $2.60 to $2.70 per share, from a prior range of $2.50 to $2.70 per share. Analysts currently expect earnings of $2.60 per share for the year.

The guidance excludes restructuring and other items of $0.20 per share, while earlier it expected such charges of $0.10 per share.

In July, Avery Dennison closed the sale of its Office and Consumer Products and Designed and Engineered Solutions businesses to Canada-based CCL Industries Inc. (CCL_A.TO, CCL_B.TO) for $500 million. The company expects net proceeds from the sale of about $400 million, which it plans to use mainly to buyback shares.

Avery Dennison stock is trading at $47.49, up $3.44 or 7.81%, on a volume of 1.4 million shares. In the past year, the share traded in the range of $31.38 - $49.97.