Avery’s Shares Fall on Analysts’ Downgrade
Shares of Avery Dennison Corp. fell Thursday to their lowest levels since 2001, as two prominent Wall Street analysts moved to downgrade the stock in the wake of disclosures that the label-making giant expects to be subpoenaed in a federal criminal investigation of anti-competitive practices.
After falling nearly 13% on Tuesday and Wednesday after the criminal probe was disclosed late Monday, the stock fell an additional 9% on Thursday in the heaviest trading in years.
The share price lost $4.67 Thursday to end at $47.83 on the New York Stock Exchange. That’s the lowest close since Oct. 31, 2001.
The losses this week have slashed the Pasadena-based firm’s market value by about $1.4 billion, to $5.3 billion.
Thursday’s decline came after Avery executives confirmed Wednesday that the company is the unnamed firm accused in a federal antitrust lawsuit of working with a smaller rival “to limit competition” in the label-making industry.
Analysts at Merrill Lynch & Co. and J.P. Morgan lowered their outlook for the stock Thursday, sending some investors on a selling spree. Avery was downgraded to “neutral” from “buy” by analyst Karen Lane Gilsenan at Merrill Lynch and from neutral to “underweight,” or sell, by Jeffrey Zekauskas at J.P. Morgan.
“While the company’s fundamentals appear strong, these allegations are troubling and we do not see the stock having a strong upside until there is more clarity on the issue,” Gilsenan wrote in her report.
But she added that, given the loss of market value in recent days, “It appears to us that much of the bad news is already discounted in the current price.”
On Tuesday, the Justice Department filed an antitrust suit in Chicago seeking to block the union of two of Avery’s biggest competitors in the market for unfinished adhesive labels, known as label stock.
Although Avery isn’t named in the suit, executives confirmed Wednesday that Avery is the “leading producer” named in the suit that has a supplier-customer relationship with competitor UPM-Kymmene of Finland.
That relationship gives the companies the “motivations, opportunities and means to coordinate on price, monitor adherence, punish cheating and engage in side payments,” according to the suit.
Avery, which earned $257 million last year on sales of $4.2 billion, is not a defendant in the suit and no charges have been filed by the Justice Department against the company.
