A month has gone by since the last earnings report for Avery Dennison (AVY). Shares have added about 8.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Avery Dennison due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Avery Dennison Q4 Earnings Beat Estimates, Rise Y/Y

Avery Dennison has delivered adjusted earnings of $2.16 per share in fourth-quarter 2023, beating the Zacks Consensus Estimate of $2.15. The bottom line increased 31% year-over-year.  

Including one-time items, the company has reported earnings per share (EPS) of $1.77 compared with the year-ago quarter’s $1.51.

Total revenues moved up 4.2% year over year to $2.11 billion, beating the Zacks Consensus Estimate of $2.09 billion. Volumes in both segments were up sequentially.

The cost of sales in the quarter dipped 0.7% year over year to $1.51 billion . The gross profit rose 19.2% year over year to $596 million.

Marketing, general and administrative expenses were $335 million compared with the $312 million incurred in the year-ago quarter. The adjusted operating profit was around $261 million compared with the prior-year quarter’s $188 million. The adjusted operating margin was 12.4% compared with 9.3% in the prior-year quarter.

Segmental Highlights

Revenues in the Materials Group segment declined 1.6% year over year to $1.42 billion  in the reported quarter. The reported figure missed our estimate of $1.49 billion . On an organic basis, sales were down 3.9%. We predicted organic sales to rise 1.2%. The segment’s adjusted operating profit increased 31.9% year over year to $198 million.

Revenues in the Solutions Group were up 18.3% year over year to $692 million. We estimated revenues of $605 million for this segment. On an organic basis, sales improved 13.9% year over year. Our model predicted a rise of 0.9%. The variance was driven by a sequential improvement in Apparel Solutions volume. The segment’s adjusted operating income rose 51.6% year over year to $80.5 million.

Financial Updates

The company returned $394 million in cash to shareholders through share repurchases and dividend payments in 2023. AVY repurchased 0.8 million shares throughout the year.

Avery Dennison ended 2023 with cash and cash equivalents of $215 million compared with $167 million at the end of the prior year.

The company’s long-term debt was $2.62 billion  at the end of 2023, up from $2.50 billion  at the end of 2022. The company’s net debt to adjusted EBITDA ratio was 2.4X.

AVY realized approximately $69 million in pre-tax savings from restructuring (net of transition costs) in 2023. The company also incurred pre-tax restructuring charges of around $79 million.