On Thursday, BofA Securities shifted its stance on Avery Dennison Corporation (NYSE:AVY) shares, elevating the stock from an Underperform to a Buy rating. The firm also increased its price target on the shares from $207.00 to $250.00, marking a notable change in their valuation of the company.
The upgrade comes after Avery Dennison's shares have underperformed the market year-to-date, trailing by approximately 15%. BofA Securities highlights that their research indicates an improving situation in the box markets, which is expected to benefit Avery Dennison's businesses.
This positive shift is supported by the Bank of America Institute's report, which forecasts an enhanced outlook for e-commerce, a sector that directly impacts corrugated shipments and Avery’s label-related businesses.
Avery Dennison's commitment to quality and its diversified pressure-sensitive materials business were key factors in BofA Securities' reassessment. The firm believes that Avery Dennison will demonstrate strong Economic Value Added (EVA) and Return on Invested Capital (ROIC) trends in the coming years, despite concerns raised by the recent preannouncement of lower results from a European competitor.
At the company's recent analyst day, Avery Dennison provided what BofA Securities considers to be a prudent guidance for its Materials segment. The firm's positive outlook is further cemented by Avery Dennison's value-added and diversified business model, which is seen as more robust compared to some of its European counterparts.
In other recent news, Avery Dennison Corporation has been the subject of multiple analyst reviews. Truist Securities maintained a Buy rating on the company's stock, despite the impact of UPM-Kymmene Corporation's weaker-than-expected earnings on the label production market. Avery Dennison's Q2 earnings per share (EPS) of $2.42 surpassed expectations, leading to an increased full-year earnings guidance to a range of $9.30 to $9.50 per share.
Barclays recently initiated coverage on Avery Dennison with an Overweight rating and a price target of $250. The firm expressed confidence in the company's growth prospects, particularly in its Radio-Frequency Identification (RFID) and digital ecosystem ventures. BMO Capital Markets adjusted its price target for Avery Dennison to $252 from $254, maintaining an Outperform rating.
UBS downgraded Avery Dennison from a "Buy" to a "Neutral" rating, citing concerns over slower growth in the RFID segment. Meanwhile, Baird reaffirmed its Outperform rating on Avery Dennison shares, with a steady price target of $250.00, supporting the view that Avery Dennison's long-term financial goals reflect a continuation of the company's strong growth dynamics. Lastly, Citi reaffirmed its Neutral rating on Avery Dennison Corporation, with a steady price target of $241.00.
InvestingPro Insights
Avery Dennison's recent upgrade by BofA Securities aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $17.34 billion, reflecting its significant presence in the industry.
InvestingPro data shows that Avery Dennison has maintained dividend payments for an impressive 54 consecutive years, with a current dividend yield of 1.64%. This consistent dividend history, coupled with a recent dividend growth of 8.64%, underscores the company's financial stability and commitment to shareholder returns.
InvestingPro Tips highlight that Avery Dennison has raised its dividend for 13 consecutive years, further reinforcing BofA Securities' positive outlook on the company's financial health and future prospects.
Moreover, the company's strong return over the last five years, as noted in another InvestingPro Tip, aligns with BofA's expectations of robust Economic Value Added (EVA) and Return on Invested Capital (ROIC) trends.
While the company's P/E ratio of 27.6 might seem high, it's important to consider this in the context of Avery Dennison's consistent performance and market position. The company's revenue for the last twelve months as of Q2 2024 was $8.59 billion, with a gross profit margin of 28.81%, indicating a solid financial foundation.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 10 more tips available for Avery Dennison on the platform.
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