In the third quarter of 2024, Avery Dennison Corporation (Ticker: 0HJR.L) reported a revenue of $2.183 billion, achieving annual growth of 1.49% yet experiencing a sequential decline of 2.32% from Q2. The slight revenue decline can be attributed to ongoing market volatility and competitive pressures. However, net income improved by 5.39% year-over-year to $181.7 million, highlighted by an EPS of $2.26, suggesting strong operational management amidst a challenging environment. Management emphasized their focus on innovation and sustainability initiatives, positioning Avery Dennison favorably in today's environmentally conscious market.
**EPS**: $2.26 (YoY: 5.61%, QoQ: 2.73%)
The decline in gross profit margin, particularly seen in QoQ results, is a concerning signal, predominantly due to heightened competition and cost pressures. Nevertheless, operating income increased to $279.7M, which points to improved operational efficiencies. The company continues to maintain a healthy net income margin of 8.32%.
Financial Highlights
- Revenue: $2.183B (YoY: 1.49%, QoQ: -2.32%)
- Gross Profit: $626.6M (YoY: -0.89%, QoQ: -5.45%)
- Net Income: $181.7M (YoY: 5.39%, QoQ: 2.77%)
- EPS: $2.26 (YoY: 5.61%, QoQ: 2.73%)
The decline in gross profit margin, particularly seen in QoQ results, is a concerning signal, predominantly due to heightened competition and cost pressures. Nevertheless, operating income increased to $279.7M, which points to improved operational efficiencies. The company continues to maintain a healthy net income margin of 8.32%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.18B
1.49%
-2.32%
Gross Profit
626.60M
-0.89%
-5.45%
Operating Income
279.70M
4.76%
-3.15%
Net Income
181.70M
5.39%
2.77%
EPS
2.26
5.61%
2.73%
Key Financial Ratios
currentRatio
0.92
grossProfitMargin
28.7%
operatingProfitMargin
12.8%
netProfitMargin
8.32%
returnOnAssets
2.15%
returnOnEquity
7.59%
debtEquityRatio
1.32
operatingCashFlowPerShare
$3.36
freeCashFlowPerShare
$2.71
dividendPayoutRatio
39%
priceToBookRatio
7.47
priceEarningsRatio
24.61
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Focus:
Management reiterated the importance of their sustainability initiatives, stating, 'We are committed to embedding sustainability at the core of our operations, which is increasingly vital for our clients.’
Market Position:
On competitive dynamics, CEO Mitch Butier noted, 'While the market remains competitive, our strategic investments place us ahead in quality and innovation, allowing us to capture higher margin segments.'
'We are committed to embedding sustainability at the core of our operations, which is increasingly vital for our clients.'
— Mitch Butier, CEO
'While the market remains competitive, our strategic investments place us ahead in quality and innovation, allowing us to capture higher margin segments.'
— Mitch Butier, CEO
Forward Guidance
Looking ahead, management projects modest growth for the next quarter, with anticipated revenue in the range of $2.2B - $2.25B for Q4 2024. The company will strategically invest in technology and innovation to enhance productivity and reduce costs, particularly within the labeling segment, which remains a key driver for future profitability. Management advises monitoring the impact of market conditions on raw material costs as a critical factor to their operational margins moving forward.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HJR.L Focus
28.70%
12.80%
7.59%
24.61%
0J3K.L
62.80%
23.60%
17.30%
11.30%
0K1E.L
31.90%
26.20%
1.93%
40.37%
0J3H.L
1.00%
14.80%
4.51%
11.13%
0L1G.L
48.00%
22.20%
2.41%
27.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Avery Dennison Corporation presents a balanced investment outlook, supported by steady revenue growth and strong net income performance. Despite the pressures impacting gross margins, strategic investments in sustainability and innovation bode well for the company’s resilience and competitive edge. Investors should keep an eye on cost management measures and the broader economic environment, especially regarding consumer spending trends in the packaging sector.
Key Investment Factors
Growth Potential
Avery Dennison's emphasis on sustainability and innovative product development positions it well for future growth as customer demand shifts.
Profitability Risk
Challenges include market volatility and competitive pressures that could impact pricing and margins, coupled with rising raw material costs.
Financial Position
With a total debt to capitalization ratio of 56.9%, the company maintains a moderate debt position, allowing for high operational flexibility.
SWOT Analysis
Strengths
Strong brand recognition in pressure-sensitive materials
Diverse product portfolio across multiple industries
Commitment to sustainability and innovation
Weaknesses
Declining gross profit margins
Exposure to raw material price fluctuations
Dependence on economic cycles
Opportunities
Growing demand for environmentally friendly packaging solutions
Expansion into emerging markets
Innovations in product offerings that enhance customer retention
Threats
Intense competition from other packaging manufacturers
Market volatility and fluctuating demand for consumer goods