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  • Raymond James analyst Joshua Wilson lowered the price target on Avery Dennison Corp AVY to $195 (an upside of 12.5%) from $200 while maintaining the Outperform rating on the shares.
  • Ahead of calendar 2Q results, Wilson trimmed his estimates modestly for each covered name to account for FX mark-to-market.
  • The analyst increased inflation headwinds where appropriate. The notable exception to this dynamic was polypropylene prices, which have fallen 10-15% since May.
  • Wilson expects the continued outsized growth in intelligent labels to drive sales growth and EBITDA margin expansion, with the latter suggesting the stock has room to outperform further from here, given the shares’ relative performance’s historical relationship to EBITDA expectations.
  • The analyst says his enthusiasm is partially tempered by a relatively low forward FCF yield (~6%), combined with what appears to be reasonable market-implied LT sales growth assumptions.
  • Price Action: AVY shares closed lower by 0.27% at $174.83 on Monday.

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