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Mar 28, 2020
Avery Dennison Q1 2020 Earnings Report
Avery Dennison's earnings exceeded expectations in the first quarter, but anticipated a decline in organic growth and earnings for the year due to the coronavirus impact.
Key Takeaways
Avery Dennison announced its Q1 2020 results, revealing that while earnings exceeded expectations, the company anticipates a decline in organic growth and earnings for the year. The Label and Packaging Materials business experienced higher demand, while the RBIS business saw a significant decline. The company is actively managing the dynamic environment and expects a disproportionate impact on its second quarter results.
Earnings exceeded expectations in Q1, but a decline in organic growth is anticipated for the year.
The Label and Packaging Materials business saw higher demand due to the pandemic, while RBIS experienced a significant decline.
The company is actively managing the dynamic environment and updating scenario plans.
Free cash flow is targeted to be comparable to last year.
Forward Guidance
Due to the uncertain impact of the pandemic, Avery Dennison has suspended its annual EPS guidance. The company expects sales and earnings to decline in 2020, with a disproportionate impact on Q2 results. They are targeting free cash flow of at least $500 million in 2020 and 2021.
Positive Outlook
- LPM business is expected to fare relatively better than during 2008-2009.
- Cost control and cash management actions are being implemented to offset the decline in demand.
- Targeting to deliver free cash flow of at least $500 million in 2020 and 2021.
- Businesses have historically rebounded quickly in the year following a recession.
- Company is prepared for a range of possible macro scenarios and how they might impact each business.
Challenges Ahead
- Annual EPS guidance has been suspended due to the uncertain impact of the pandemic.
- Sales and earnings are expected to decline in 2020 due to lower demand.
- A disproportionate impact is expected on the second quarter results.
Historical Earnings Impact
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Avg. Return Before/After Earnings
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