Avery Dennison Earnings Cheat Sheet: Increasing Costs Tighten Margins as Net Income Falls

S&P 500 (NYSE:SPY) component Avery Dennison Corporation (NYSE:AVY) reported its results for the second quarter. Avery Dennison Corp. is a global manufacturer of pressure-sensitive materials, office products and a variety of paper products. It provides businesses and consumers with identification solutions and converted products, such as tickets, tags and labels. .

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Avery Dennison Earnings Cheat Sheet for the Second Quarter

Results: Net income for the paper company fell to $73.3 million (69 cents per share) vs. $83.8 million (78 cents per share) a year earlier. This is a decline of 12.5% from the year earlier quarter.

Revenue: Rose 2.7% to $1.73 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: AVY‘s adjusted earnings of 78 cents per share beat the mean analyst estimate of 75 cents per share. It fell short of the average revenue estimate of $1.83 billion.

Quoting Management: “During the second quarter, our two largest segments, Pressure-sensitive Materials and Retail Branding and Information Solutions, experienced a rapid decrease in unit volumes that drove results below expectations,” said Dean Scarborough, Avery Dennison chairman, president and CEO. “We are taking action to reduce costs and increase productivity through this slowdown, and we expect to regain momentum when market conditions improve. We remain focused on maintaining a strong balance sheet and increasing return of cash to shareholders.”

Key Stats:

Gross margin shrank 1.9 percentage points to 27.3%. The contraction appeared to be driven by increased costs, which rose 5.5% from the year earlier quarter while revenue rose 2.7%.

Revenue has risen the past four quarters. Revenue increased 6.7% to $1.66 billion in the first quarter. The figure rose 7.6% in the fourth quarter of the last fiscal year from the year earlier and climbed 5.9% in the third quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the first quarter, net income fell 18.1% from the year earlier quarter.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 51 cents versus a mean estimate of net income of 47 cents per share.

Competitors to Watch: MeadWestvaco Corp. (NYSE:MWV), Smurfit-Stone Container Corp. (NYSE:SSCC), Bemis Company, Inc. (NYSE:BMS), Verso Paper Corp. (NYSE:VRS), ACCO Brands Corporation (NYSE:ABD), Office Depot (NYSE:ODP), Target (NYSE:TGT), OfficeMax (NYSE:OMX), Staples (NASDAQ:SPLS).

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(Source: Xignite Financials)