Avery Dennison (NYSE: AVY) reported Q3 EPS of $1.91, $0.41 better than the analyst estimate of $1.50. Revenue for the quarter came in at $1.73 billion versus the consensus estimate of $1.7 billion.

Highlights:

• 3Q20 Reported EPS of $1.79, up 5%
  • Adjusted EPS (non-GAAP) of $1.91, up 15%
• 3Q20 Net sales declined 1.8% to $1.73 billion
  • Sales change ex. currency (non-GAAP) of (1.3%)
  • Organic sales change (non-GAAP) of (3.6%)
• Strong balance sheet (net debt to adj. EBITDA ratio of 1.9) with ample liquidity
• Free cash flow proving resilient… targeting more than $500 mil. for the year
• Increasing distributions to shareholders: raised dividend by 7% and resumed share repurchase late in the third quarter

“Revenue came in significantly better than we anticipated at the start of the quarter, which, combined with our cost reduction actions, enabled us to deliver strong earnings growth and free cash flow,” said Mitch Butier, chairman, president and CEO. “The extraordinary agility demonstrated by our team this year is driving solid performance on all fronts, ensuring the health and well-being of our employees, delivering for our customers, supporting our communities, and minimizing the impact of the recession for our shareholders.

“All three of our operating segments expanded their adjusted operating margins compared to last year, despite lower sales, as demand improved sequentially,” added Butier. “In particular, LGM delivered sequential improvement in sales across all regions except Europe, with faster-than-expected improvement in high value categories, such as graphics. RBIS likewise improved faster-than-expected, reflecting strong growth in both RFID and external embellishments, as well as a quicker rebound in the base.

“Once again, we are proving our resilience across business cycles,” said Butier. “I want to thank our entire team for their ongoing efforts to keep one another safe while delivering for our customers during this challenging period.”

Outlook

The company is prepared for a range of possible macro scenarios and how they might impact each of its businesses. The company currently expects sales to decline in 2020 on lower demand, with the second quarter representing the trough, and now anticipates that earnings will exceed prior year.

For the fourth quarter, the company anticipates an underlying sales trend that is similar to or better than the decline experienced in the third quarter. As previously communicated, the 2020 fiscal year includes one extra week in the fourth quarter, which is expected to add approximately one point to the company’s full year sales growth rate, and approximately four points of sales growth to the fourth quarter.

The company has initiated cost control and cash management actions to partially offset the decline in demand for certain of its businesses, and is targeting to deliver free cash flow of more than $500 million in 2020.

Other factors expected to impact the company’s full year financial performance are summarized in the company’s supplemental presentation materials, “Third Quarter 2020 Financial Review and Analysis.”

For earnings history and earnings-related data on Avery Dennison (AVY) click here.