Avery Profit Rises on Cost Controls

Avery Dennison Corp., a maker of office products and adhesive labels, posted a stronger-than-expected 31% gain in fiscal second-quarter profit Tuesday, crediting price increases and tight cost controls.

The Pasadena-based company also boosted its full-year profit outlook, reflecting improved profitability and a lower tax rate.

Net income rose to $89.4 million, or 89 cents a share, for the three months ended July 2. That compares with $68.5 million, or 68 cents, a year earlier.

Excluding one-time items, Avery earned 91 cents a share, exceeding analysts’ average forecast of 74 cents as compiled by Reuters Estimates.

Sales rose 7% to $1.42 billion.

“Our pricing actions and focus on expense management have proven effective in the short term, particularly in light of soft market conditions,” Chief Executive Dean Scarborough said in a statement.

Said Tim Ghriskey, chief investment officer with Solaris Asset Management: “The surprise here was not on the revenue side. Instead, it’s on the cost side. Clearly management has a lot of room to manage earnings.”

“This isn’t a growth industry,” said Ghriskey, who expected the company to explore job cuts, plant closures or asset sales to continue squeezing costs.

Avery raised its full-year profit outlook to $2.95 to $3.20 a share from its previous forecast of $2.85 to $3.15. Analysts on average had expected $2.93. In April, Avery cut its full-year outlook, citing factors including higher materials costs.

The company said it would look at “new opportunities for reducing our cost structure,” but it gave no specifics. A spokesman declined to say whether such actions would include job cuts.

Avery shares rose $2.48 to $56.78.