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Shares of labeling company Avery Dennison (NYSE:AVY) rose in early trade on Wednesday as brokerage UBS upgraded the stock to “Buy” from “Neutral” and raised the price target to $222 from $184, seeing strength from its Radio-Frequency Identification (RFID) division.
UBS expected Avery Dennison’s share price to climb on account of stabilizing base labels and ticket/tag businesses, “meaningful” growth in the fourth quarter and beyond, and higher RFID sales in the second half of the year.
“We estimate that AVY’s EPS will grow 26% in 2024, and then deliver annual growth of 14-15% through the rest of our 5-year forecast,” said the analysts at UBS.
The brokerage added that Avery Dennison’s Solutions segment should see a margin uplift as RFID grows from about 38% of the segment in 2023 to 52% by 2027, with RFID’s margin nearly double compared to the segment average.
UBS further modeled Avery Dennison’s adj EBIT margins expanding from the current 11.6% to 14.9% in 2026.
The Ohio-based company, which has fallen over 3.5% since the start of the year, is rated “Buy” by SA analysts and Wall Street with scores of 3.50 and 4.07, respectively, but is marked “Hold” by Quant on a score of 2.75.
