What Happened?
Shares of adhesive manufacturing company Avery Dennison (NYSE: AVY) jumped 3.9% in the afternoon session after an analyst upgrade from JP Morgan and a price target increase from BMO Capital, following a significant business win. JP Morgan analyst Jeffrey Zekauskas raised the rating on the stock to "Overweight" from "Neutral" and increased the price target to $195. Adding to the positive sentiment, BMO Capital also raised its price target to $210 from $192. BMO's optimism stemmed from a notable business win with Walmart's meat, deli, and bakery departments. Avery Dennison partnered with the retail giant to introduce radio-frequency identification (RFID) labels for fresh food, allowing for real-time tracking to improve freshness and reduce waste. BMO also pointed to recaptured business from UPS and a strong pipeline that suggested double-digit growth for its RFID technology over at least the next two years.
After the initial pop the shares cooled down to $187.06, up 4.5% from previous close.
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What Is The Market Telling Us
Avery Dennison’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.9% on the news that the company reported mixed third-quarter results where a profit beat overshadowed weaker-than-expected guidance. The adhesive manufacturing company posted adjusted earnings of $2.37 per share, beating Wall Street's estimates by 1.9%. Revenue for the quarter grew 1.5% year on year to $2.22 billion, which was in line with analyst expectations. Furthermore, the company's free cash flow margin improved to 12.1%, up from 10% in the same quarter last year, indicating better cash profitability. Investors appeared to look past the company's weaker guidance for the fourth quarter, which at a midpoint of $2.40 per share, came in below the consensus estimate of $2.44.
Avery Dennison is up 2% since the beginning of the year, but at $187.06 per share, it is still trading 10% below its 52-week high of $207.94 from November 2024. Investors who bought $1,000 worth of Avery Dennison’s shares 5 years ago would now be looking at an investment worth $1,320.
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