Avery Dennison Corporation (NYSE: AVY) makes products every office, large or small, everywhere in the world uses. Its acquisition of Paxar in June has expanded Avery's market share and geographic reach. Cost savings from the acquisition were recently revised to be bigger than expected, $115-$125 million, and materialize sooner. The stock has a P/E ratio below its industry average while the company's EPS is 500% (not a typo) above industry average. Additionally, the stock has fallen more than 10% in price since opening the year at $68.08, so might be considered undervalued at its present price of $59.72.

In late July, Avery Dennison released 2Q 2007 earnings which, though filled with hedges regarding the final costs of acquiring and integrating Paxar, present a very positive current outlook that is forecast to improve even more in 2008. Despite the fact that net income for 2Q declined, net sales increased 8% to $1.52 billion through both acquisition and organic growth. Adjusted EPS was up 3%, but this figure excludes the impact of Paxar that equates to acquisition charges of $0.15 per share thus far. Avery's pressure-sensitive label division increased sales by 8.6% to $879 million, while the retail brand ID division increased sales almost 21% to $219 million, due primarily to the Paxar acquisition. Non-label office products division showed a 1% decline in sales in $263 million.

The fluctuations throughout the company are due to restructuring and reorganizing necessary to integrate Paxar. Thus has caused Avery Dennison CEO Dean Scarborough to revise FY 2007 guidance downwards slightly from EPS in the $4.05-$4.30 range to EPS in the $3.90-$4.10 range. Management still forecasts revenue growth to be in the double digit range, including the bump in revenue from Paxar.

Label maker and brand ID company Avery Dennison Corporation (NYSE: AVY) posted good 1Q 2007 earnings on April 24. Net income for the quarter was up by just over $10 million to $79.2 million or EPS $0.80 compared to EPS $0.68 in 1Q 2006. Net sales were up 3.9% to $1.39 billion. Only part of this sales growth is due to acquisition. The rest is due to organic growth, always a good sign. Avery Dennison returned these good numbers despite a price increase during the quarter that pushed companies to stock up in 4Q 2006.

According to CEO Dean Scarborough, Avery Dennison is still in the midst of a restructuring project which will eventually result in substantial cost savings. Management estimates total savings of over $40 million in FY 2007 alone. In quarters to come, Avery Dennison will see growth via the completion of its acquisition of brand identification company Paxar. The US government's anti-trust unit gave permission for the acquisition to move forward on 20 April. Paxar shareholders are expected to vote in favor of the acquisition during their summer meeting.

In the meantime Avery Dennison is putting up good sales numbers, up 9.2% to $860 million in its pressure-sensitive materials division. Much of this growth came from the company's international markets. This increase helped offset a 10.6% decline to $214 million in its office and consumer products division, with a softening of the North America market and January 2007 price increases. Retail information services increased 1.6% to 156 million. Half of this increase came from organic growth, and half by acquisition. Excluding the Paxar acquisition, Avery Dennison is on track to post FY revenue growth numbers between 2-5%, or FY EPS of $3.95-4.25. The stock closed at $65.91, up $0.27 on 11 June 2007.