Citi has reaffirmed its Neutral rating on Avery Dennison Corporation (NYSE: NYSE:AVY), with a steady price target of $241.00.
The decision came after the company's Investor Day in New York, where management presented updated long-term financial targets. Avery Dennison's shares experienced a slight decrease following the event.
The company's revised financial goals, which include revenue growth excluding foreign exchange of over 5% and an earnings per share compound annual growth rate (EPS CAGR) of more than 10%, align with Citi's projections.
Avery Dennison also increased its EBITDA margin target by 100 basis points to exceed 17% by 2028. The adjusted target for Intelligent Labels (IL) growth, scaled back from over 20% to 15%+, is seen by Citi as comparable to their own forecasts that anticipate high-teens percentage growth year-over-year.
Citi's maintained price target comes after a review of Avery Dennison's performance in comparison to market benchmarks. Following the previous day's market activity, Avery Dennison's shares are trading at 21.5 times the consensus next twelve months (NTM) earnings per share, which is roughly in line with the S&P 500's multiple of 21.2 times and consistent with the five-year average for the company.
In other recent news, Avery Dennison Corporation exceeded earnings expectations with a Q2 earnings per share (EPS) of $2.42, leading to an increased full-year earnings guidance to a range of $9.30 to $9.50 per share.
Despite anticipating a mid-single-digit percentage decline in Q3 EPS due to seasonal volume drops, the company expects record revenue in Q4 and aims for over 20% volume growth in intelligent labels for the year. Analysts at Truist Securities maintained a Buy rating on Avery Dennison, while UBS downgraded the company from a "Buy" to a "Neutral" rating, citing concerns over slower growth in the RFID segment. BMO Capital Markets also revised its outlook, reducing its price target on the stock to $254 from $256, but maintained an Outperform rating.
InvestingPro Insights
As Avery Dennison Corporation (NYSE:AVY) navigates its way towards its updated financial goals, insights from InvestingPro provide a deeper understanding of the company's current market position. With a market capitalization of $16.86 billion and a P/E ratio standing at 26.99, investors are looking at a company that trades at a premium relative to its near-term earnings growth. This is further underscored by a PEG ratio of 2.33 and a Price / Book multiple of 7.37, which may suggest that the stock is valued richly by the market.
InvestingPro Tips highlight that Avery Dennison has a commendable history of raising its dividend, doing so for 54 consecutive years, and maintaining a current dividend yield of 1.68%. This consistent return to shareholders is a testament to the company's financial discipline and commitment to its investors. However, analysts have tempered their enthusiasm slightly, with five analysts revising their earnings downwards for the upcoming period, potentially signaling caution regarding future profitability.
For those keen on exploring further, Avery Dennison has 9 additional InvestingPro Tips available, which could provide more nuanced guidance for investment decisions. With the next earnings date on the horizon, these insights could be particularly valuable for investors seeking to understand the company's trajectory in the context of its stock's performance and market valuation.
InvestingPro's fair value estimate of $197.17 also offers a counterpoint to analyst targets, providing a data-driven perspective for investors considering Avery Dennison's stock. As the company presses on with its long-term financial targets, these InvestingPro Insights can serve as a valuable tool for investors looking to align their expectations with market realities.
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