January 29, 2010 / 2:20 PM / 9 years ago

UPDATE 2-Avery Dennison Q4 profit lags Street, shares fall

* Q4 adj. EPS $0.44 vs est. $0.68

* Rev up 1 pct

* Says end markets remain soft

* Shares fall 12 pct (Recasts; adds outlook, analyst comments, updates share movement)

By Bhaswati Mukhopadhyay

BANGALORE, Jan 29 (Reuters) - Label and office supplies maker Avery Dennison Corp (AVY.N) reported a lower-than-expected quarterly profit, hurt by volume declines across its segments, sending its shares down 12 percent.

Robert W. Baird analyst Ghansham Panjabi said the company focused more on clearing existing inventory in its warehouses than on production in the fourth quarter.

“They chose to... reduce inventory and maximize cash flow, which is why the EPS number came in quite a bit below the Street consensus, and that is pressuring the stock this morning,” Panjabi added.

Avery Dennison, whose key competitors are Bemis Co BMS.N, 3M Co (MMM.N) and Acco Brands Corp ABD.N, continues to see softness in its end markets.

For the fourth quarter, the company reported net income of $49.9 million, or 47 cents a share, compared with $42.6 million, or 43 cents a share, a year ago.

On an adjusted basis, it earned 44 cents a share. Analysts on average were expecting earnings of 68 cents a share, according to Thomson Reuters I/B/E/S.

Revenue for the company — which makes self-adhesive labels and other products used by retailers — rose a tad to $1.52 billion from $1.51 billion a year ago. Analysts were expecting $1.51 billion.

Sales at the office and consumer products segment fell 9 percent to $205.2 million, led by slower corporate purchasing activity.

Sales at the retail information services segment — which makes marking and brand identification products — fell 2 percent to $350.5 million, hurt by lower demand for apparel in the United States and Europe.

The company’s businesses have a fair amount of economic sensitivity, with the office products business typically correlated with unemployment and the labels business linked to the gross domestic product, Panjabi said.

For 2010, the company expects adjusted earnings of $2.00 to $2.30 a share if organic sales are flat, and $2.70 to $3.00 a share if organic sales rise 5 percent.

“They are essentially being non-committal on the outlook,’ the analyst added.

Avery Dennison shares, which were among the top percentage losers on the New York Stock Exchange, were down $3.96 at $34.14 in morning trade. The touched a low of $33.52 earlier. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Unnikrishnan Nair, Anne Pallivathuckal)

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