Avery Dennison Corp.'s (AVY) third-quarter profit rose 2.7% following prior-year charges, while revenue growth was nearly offset by margin declines.
Results topped analysts' estimates and the office-supply and label manufacturer raised its forecast for the year to earnings of $3.10 to $3.20 a share on revenue growth of 9%, from $2.60 to $2.80 and 7% to 8%, respectively.
Avery has seen earnings rebound sharply the past several quarters. Chairman and Chief Executive Dean Scarborough said "strong top-line growth" in the third-quarter was again driven by its pressure-sensitive materials, which makes roll materials and graphics, and retail information-services segments.
Margins, however, came under pressure as rising raw material costs outpaced price increases as expected, said Scarborough. Gross margin fell to 27.6% in the third quarter from 28.1% a year ago.
Avery reported a profit of $64.2 million, or 60 cents a share, up from $62.5 million, or 59 cents a share, a year earlier. Excluding restructuring costs and asset write-downs, earnings fell to 62 cents from 82 cents. Revenue increased 5.9% to $1.64 billion.
Analysts polled by Thomson Reuters had most recently estimated earnings of 61 cents and $1.59 billion in revenue.
Beyond the gross-margin drop, tax provisions also pressured the bottom line in the latest quarter.
Sales of pressure-sensitive materials, Avery's biggest segment by revenue, rose 5.4% as profit decreased 4.6%. The retail-information-services segment had 17% revenue growth, helping the operation swing to a profit.
Last week, Avery sued 3M Co. (MMM) for allegedly unlawfully monopolized markets for a type of sheeting that makes road signs more reflective at night, along with complaints of fraud and false advertising. The lawsuit was in response to a patent-infringement claim brought by the industrial conglomerate against Avery, in an attempt to prevent Avery from offering its new OmniCube product, which uses retroreflective technology.
Shares closed at $39.16 Tuesday and were inactive premarket.
-By Jodi Xu, Dow Jones Newswires; 212-416-3037; firstname.lastname@example.org