On Wednesday, BMO Capital Markets adjusted its outlook on Avery Dennison Corp (NYSE:AVY), a company specializing in labeling and packaging materials and solutions. The firm reduced its price target on the stock to $254 from the previous $256, while maintaining an Outperform rating.
The adjustment followed a volatile trading day for Avery Dennison, which saw its stock initially rise by 4% but ultimately close down 1.6%. This fluctuation occurred despite the company reporting a second-quarter performance that surpassed expectations and included a guidance increase, which was not anticipated by the market.
The analyst from BMO Capital highlighted several factors influencing the revised price target. On the positive side, the moderation in apparel destocking occurred earlier than expected, and the company's Mats business margins showed more resilience than previously feared. On the downside, the forecast for Avery Dennison's RFID (radio-frequency identification) segment was slightly lowered due to various reasons.
Looking ahead, the analyst expressed confidence in Avery Dennison's future performance. The second-quarter results suggest that the company is nearing a $10 earnings per share run-rate more quickly than anticipated.
Additionally, BMO Capital forecasts robust mid to high single-digit top-line growth and anticipates record margins for Avery Dennison in the years 2025 and 2026. These factors underpin the firm's expectation that Avery Dennison's stock is set to outperform and reach the newly established $254 price target.
In other recent news, Avery Dennison Corporation (NYSE:AVY) reported strong second-quarter performance, with earnings per share (EPS) of $2.42 surpassing expectations.
The company has consequently raised its full-year earnings guidance to between $9.30 and $9.50 per share, indicating an approximately 20% growth over the previous year.
Truist Securities acknowledged these developments by adjusting its outlook on Avery Dennison, increasing the price target to $258 from $253, while reaffirming a Buy rating on the stock.
The company's resilient Materials group, significant growth in the Solutions group, and confidence in the growth potential of their intelligent labels platform were highlighted.
However, Avery Dennison anticipates a mid-single-digit percentage decline in Q3 EPS due to historical seasonal volume drops. Despite these challenges, the company expects record revenue in Q4 and targets over 20% volume growth in intelligent labels for the year.
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