It’s safe to say that just about every adult in the U.S. is familiar with
Avery Dennison’s NYSE: AVY labels that you can pick up at any office supply store.
But at a time when digital technology is revolutionizing essentially every industry, sticky labels are not exactly the growth driver for the future.
The company’s product and service lines include medical manufacturing, printable film, radio-frequency identification (RFID) labels, sustainable digital tags, injection and extrusion molds and noise reduction solutions, among others.
The company serves customers in a range of industries, including food, apparel, beauty, and medicine. Its wares have applications for logistics and transportation, retail, manufacturing, and more.
Avery Dennison began rallying to new highs in October as it emerged from the base it began forming in February 2020, as the broad market plummeted.
The stock has advanced 42% since the end of September. Year-to-date, it’s up 17.17%. It closed Wednesday at $131.13, up $0.60 from Thursday’s close.
On Wednesday, Avery Dennison launched atma.io, a cloud-based platform. In a news release, the company said the technology is “capable of creating, assigning and managing unique digital identities for every physical item in the world.”
Sportswear brand Adidas is using the technology to tag products in its supply chain, with the idea of giving every physical product a digital I.D.
Growing Through Acquisition
Avery Dennison had plenty of news lately.
On March 1, the company said it had completed its acquisition of JDC Solutions, a privately held company that makes maker pressure-sensitive specialty tapes. The tapes are used in the automotive, consumer appliance and construction industries, among others.
Avery Dennison stock jumped 14.73% in early February following a strong fourth-quarter report.
The company posted earnings per share of $2.27, up 31% from a year ago. Revenue was $1.99 billion, a year-over-year gain of 12%.Those results beat expectations on the top and bottom lines.
The quarter marked the first year-over-year revenue growth in the past eight quarters. ‘
The company’s full-year guidance calls for earnings between $7.65 and $8.05 per share.
Analysts expect 2021 earnings of $7.95 per share, up 12% from 2020. For 2022, Wall Street has pegged earnings at $8.66 per share, a projected gain of 9%. Both estimates were revised higher after the company’s earnings report.
The company’s dividend per share grew in each of the past seven years, and now stands at $2.48. Its three-year dividend growth rate is 34.09%.
Price Targets Boosted
There were three analyst actions in the stock Wednesday.
Morgan Stanley boosted its price target from $174 to $182, with a rating of equal weight. BMO Capital Markets lifted its price target from $190 to $200 with a rating of outperform.
Meanwhile, Atlantic Securities downgraded Avery Dennison from overweight to neutral.
The analyst consensus rating is $176.70, up from $167 30 days ago.
The stock gapped up 6.68% in early February, following the earnings report. That surge pushed the stock 7.8% above its 50-day moving average, and it’s been trending above that line since then.
Over the past 50 trading sessions, upside volume has outpaced downside. That’s a good indication that institutional investors are buying more shares, rather than selling.
The stock has been hugging its 10-day moving average since the early February gap-up. It slipped below that line in light trading volume on March 4, but retraced those losses in the next session.
Light trading volume, either to the upside or downside, indicates weaker conviction in the move. For example, a downside day on light volume could indicate one fund is paring back a position, rather than multiple institutions seeing a problem in the company, and stampeding for the exits.
The stock has been trading in a tight range for the past two weeks. Here again, watch what that means for the institutions. It is a signal that mutual funds, insurance companies, hedge funds, banks, and other big owners are holding shares at a certain level. Tight trading often precedes a further price run-up.
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