Core Insights - Avery Dennison Corporation reported an EPS of $2.37 for the quarter ending September 2025, exceeding the expected $2.32, indicating a 2.16% earnings surprise and growth from $2.33 in the same quarter last year [2][6] - The company generated revenue of $2.22 billion, slightly below the projected $2.26 billion but representing a 1.5% increase from $2.18 billion in the previous year [3][6] Financial Metrics - The company has a price-to-earnings (P/E) ratio of approximately 19.40, reflecting investor expectations for future earnings growth [4][6] - The debt-to-equity ratio stands at 1.61, indicating a higher reliance on debt for financing, while the current ratio is approximately 1.04, showing the ability to cover short-term liabilities [5][6] - The earnings yield is about 5.15%, showcasing the company's potential for delivering value to shareholders [5]

Core Insights - Avery Dennison Corporation (AVY) reported third-quarter 2025 adjusted earnings of $2.37 per share, exceeding the Zacks Consensus Estimate of $2.32, with a year-over-year increase of 1.7% driven by productivity gains [1][10] - Total revenues for the quarter grew 1.5% year over year to $2.22 billion, surpassing the Zacks Consensus Estimate of $2.21 billion [2][10] - The company expects adjusted EPS for the fourth quarter of 2025 to be between $2.35 and $2.45 [8][10] Financial Performance - The cost of sales increased 1.5% year over year to $1.58 billion, while gross profit improved 1.3% to $635 million, maintaining a gross margin of 28.7% [2] - Marketing, general and administrative expenses rose to $354 million from $347 million in the previous year, with adjusted operating profit around $281 million, slightly up from $280 million [3] - The adjusted operating margin was 12.7%, a slight decrease from 12.8% in the prior year [3] Segment Performance - Revenues in the Materials Group segment increased 1.2% year over year to $1.52 billion, with an adjusted operating profit growth of 3.6% to $230 million [4] - The Solutions Group saw revenues rise 2% year over year to $699.5 million, but adjusted operating income decreased by 9.9% to $69.7 million [5] Cash and Debt Position - The company returned $670 million to shareholders through share repurchases and dividends in the first nine months of 2025, repurchasing 2.5 million shares [6] - At the end of the quarter, cash and cash equivalents stood at $536 million, up from $213 million a year ago, while long-term debt increased to $3.20 billion from $2.04 billion [7] Stock Performance - AVY shares have decreased by 19.6% over the past year, compared to a 33.8% decline in the industry [9]

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Core Insights - The company reported a solid third quarter with earnings up 2% year over year, driven by productivity and higher volume mix despite ongoing trade policy changes [3][12][21] - The apparel segment showed divergent trends, with high-value category apparel sales growing in the high single digits, while base apparel volumes remained down low single digits due to soft retail demand [4][5][17] - The Solutions Group achieved organic sales growth of 4%, supported by strong performance in high-value categories, particularly VESCOM and Embellix, both exceeding 10% growth [1][16][17] Financial Performance - Adjusted earnings per share reached $2.37, up 2% compared to the prior year, with reported sales increasing by 1.5% [12][21] - The adjusted EBITDA margin was strong at 16.5%, reflecting a 10 basis point increase year over year [12] - The company generated strong adjusted free cash flow of nearly $270 million in the quarter, maintaining a robust balance sheet with a net debt to adjusted EBITDA ratio of 2.2 [13] Segment Performance - The Materials Group experienced a slight revenue decline of 2% on an organic basis, primarily due to low single-digit deflation-related price reductions [14][15] - Specialty durable labels and adhesives continued to show strong growth, partially offsetting declines in graphics and performance tapes [2][15] - Intelligent Labels sales grew approximately 3% year over year, driven by key segments such as apparel, food, logistics, and industrial [4][17] Strategic Developments - The company announced a major partnership with Walmart to leverage RFID innovations in fresh grocery categories, marking a significant industry milestone [5][30] - The strategic focus on high-value categories is evident, with these categories now representing 45% of total business year to date [8][9] - The company is committed to disciplined capital allocation, having repurchased approximately $454 million in stock and grown dividends by 7% [10][13] Outlook - For the fourth quarter, the company anticipates reported sales growth of 5% to 7%, with organic growth expected to be between 0% to 2% [18][19] - The company expects to see high-value categories return to growth in the fourth quarter, despite current trade policy uncertainties [2][7] - The outlook incorporates seasonality and incremental productivity, with adjusted earnings per share projected to be in the range of $2.35 to $2.45 [19][21]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.37, up 2% year over year, exceeding the midpoint of expectations [11] - Reported sales increased by 1.5% compared to the prior year, with organic sales remaining comparable to the prior year [11] - Adjusted EBITDA margin was strong at 16.5%, up 10 basis points year over year, with adjusted free cash flow of nearly $270 million generated in the quarter [12][11] Business Line Data and Key Metrics Changes - Materials Group sales were down 2% on an organic basis, with modest volume mix growth offset by low single-digit deflation-related price reductions [13] - Solutions Group delivered organic sales growth of 4%, driven by high single-digit growth in high-value categories, while base solutions were down low single digits [15] - Apparel business saw high-value category sales grow high single digits, while base apparel remained down low single digits due to soft retailer demand [5][6] Market Data and Key Metrics Changes - North America and Europe experienced continued soft consumer product demand, leading to comparable volume, while emerging markets showed growth with Asia-Pacific up low single digits and Latin America up mid-single digits [14] - The company noted that general retail categories continued to experience tariff-related softness, with sales down mid-teens [16] - The enterprise-wide Intelligent Labels sales grew approximately 3% compared to the prior year, with growth in apparel and food segments [6][15] Company Strategy and Development Direction - The company is focused on leveraging its RFID innovation and solutions, particularly in the fresh grocery categories, as evidenced by a new partnership with Walmart [6][9] - The strategic shift towards high-value categories is underscored by these categories now representing 45% of total business year to date [9] - The company anticipates improved year-over-year growth in the fourth quarter, despite ongoing trade policy uncertainties [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macro uncertainties and maintain strong profitable growth [8][19] - The company expects slight improvements in organic sales growth and continued year-over-year EPS growth in the fourth quarter [18][19] - Management highlighted the importance of innovation and strategic partnerships in driving future growth, particularly in the food segment [6][9] Other Important Information - The company repurchased approximately $454 million in stock and increased its dividend by 7% year to date [10] - The acquisition of Tailor Adhesives for $390 million is expected to strengthen the Materials Group's high-value category adhesives franchise [10] - The company is transitioning to a fiscal calendar that aligns with the Gregorian calendar, which will add approximately 2% to growth in the fourth quarter [70] Q&A Session Summary Question: How are volumes progressing in the Materials segment given macro uncertainty? - Management indicated that while overall volumes were positive, they were less than expected due to lower retail volumes and muted demand from consumer packaged goods [22][23] Question: Can you discuss the Walmart partnership and its potential impact? - The partnership is seen as a critical validation of the company's technology, with expectations of high single-digit to low double-digit growth in Intelligent Labels revenue over the next couple of years [25][28] Question: What is the current status of the Intelligent Labels pipeline? - The pipeline continues to grow in both opportunities and dollar value, with good traction in key segments [31][32] Question: How does RFID technology coexist with other IoT technologies in Walmart? - The company believes UHF RFID is the best-suited technology for item-level identification, while other IoT technologies have specific use cases [49][50] Question: What are the expectations for the Embelex business going forward? - Management expressed optimism for continued growth in the Embelex business, particularly related to the World Cup [62][64] Question: Where is deflation occurring in materials, and how does it compare to price competition? - Deflation has been observed primarily in paper and chemicals, with slight headwinds from price inflation due to tariffs [73][74] Question: Why is there a positive disconnect this quarter between Intelligent Labels and apparel? - The difference is attributed to new rollouts and technology deployments that have been successful despite overall apparel weakness [77]

Financial Performance - The company reported net sales of $2.2 billion[16] - Adjusted EPS (non-GAAP) was $2.37, a 2% increase year-over-year[13, 16] - Strong adjusted free cash flow (FCF) of $269 million was generated[15, 16] - The adjusted EBITDA margin was 16.5%, up 10 bps[17] - The company returned $167 million to shareholders through share repurchases and dividends[16] Segment Performance - Materials Group reported sales increased 1.2% to $1.5 billion[27] but sales down 1.9% organically[27] - Solutions Group reported sales increased 2.0% to $700 million[30] and sales up 3.6% organically[30] - High-value categories delivered sales of approximately $1.0 billion, with low single-digit (LSD) organic growth[18] - Base categories delivered sales of approximately $1.2 billion, with low single-digit (LSD) organic decline[18] Outlook and Strategy - The company expects Q4 adjusted EPS to be between $2.35 and $2.45[14] - Full-year reported sales growth is projected at 5-7%, including a ~2% tailwind from currency translation and ~2% impact from extra days[45] - The company completed the acquisition of Taylor Adhesives for $390 million[15]

Core Insights - Walmart and Avery Dennison announced a strategic partnership to implement new RFID technology in Walmart's fresh food departments, including bakeries, meat, and deli sections [1] - This is the first solution of its kind in the industry, utilizing RFID smart tags and sensor technology designed specifically for high humidity and low-temperature environments, such as meat coolers [1] - The technology aims to enhance inventory tracking accuracy and speed, ensuring product availability while improving operational efficiency and enabling smarter product rotation and markdown decisions based on digital shelf-life information [1] Company and Industry Summary - The partnership is expected to help reduce unsold food and food waste, directly supporting Walmart's goal to halve food loss and waste intensity in its global operations by 2030 [1] - Walmart serves approximately 270 million customers weekly, while Avery Dennison anticipates achieving $8.8 billion in sales across over 50 countries in 2024 [1] - Christyn Keef, Vice President of Front-End Business Transformation at Walmart U.S., emphasized that technology should simplify the lives of both employees and customers [1]

Financial Performance - Reported EPS for Q3 2025 was $2.13, with adjusted EPS (non-GAAP) of $2.37, reflecting a 2% increase year-over-year [6]. - Net sales for Q3 2025 reached $2.2 billion, up 1.5% compared to the same period last year, with organic sales remaining comparable to the prior year [6]. - Net income for the three months ended September 27, 2025, was $166.3 million, compared to $181.7 million for the same period in 2024, indicating a decline of 8.5% [29]. - The company’s net income per common share, assuming dilution, was $2.13 for the three months ended September 27, 2025, compared to $2.25 for the same period in 2024, a decrease of 5.3% [29]. - The company reported a net income of $174.0 million for the fourth quarter of 2024 [58]. Sales and Revenue - The Materials Group reported sales of $1.5 billion, a 1.2% increase, while organic sales decreased by 1.9% due to deflation-related price reductions [9]. - The Solutions Group saw reported sales increase by 2.0% to $700 million, with organic sales up 3.6%, driven by high-value categories like Intelligent Labels [9]. - Total net sales for the three months ended September 27, 2025, were $2,215.5 million, a slight increase from $2,183.4 million for the same period in 2024, representing a growth of 1.5% [49]. - The Materials Group reported net sales of $1,516.0 million for the three months ended September 27, 2025, an increase from $1,497.7 million in the same period of 2024 [55]. - The Solutions Group achieved net sales of $699.5 million for the three months ended September 27, 2025, compared to $685.7 million in the prior year, reflecting a growth of 2.6% [55]. Profitability Metrics - Adjusted EBITDA margin (non-GAAP) for Q3 2025 was 16.5%, up from 16.4% in the prior year, driven by productivity benefits [27]. - Adjusted operating income (non-GAAP) for the three months ended September 27, 2025, was $281.1 million, compared to $279.7 million in the prior year, reflecting a growth of 0.5% [51]. - Adjusted EBITDA (non-GAAP) for the nine months ended September 27, 2025, reached $1,085.0 million, up from $1,076.2 million in the same period of 2024, indicating a growth of 0.8% [51]. - The company reported an operating margin of 11.9% for the three months ended September 27, 2025, slightly down from 12.1% in the same period of 2024 [49]. - Adjusted operating margins (non-GAAP) for the Solutions Group were 10.0% for the three months ended September 27, 2025, compared to 11.3% in the prior year [56]. Cash Flow and Liquidity - Cash and cash equivalents increased to $536.3 million as of September 27, 2025, from $212.7 million a year earlier, showing a significant increase of 152.5% [31]. - The company reported a net cash provided by operating activities of $504.6 million for the nine months ended September 27, 2025, down from $587.6 million in the prior year, a decrease of 14.1% [34]. - Net cash provided by operating activities for the three months ended September 27, 2025, was $312.1 million, compared to $270.1 million in the prior year, representing an increase of 15.6% [52]. - The adjusted free cash flow (non-GAAP) for the three months ended September 27, 2025, was $268.7 million, up from $219.4 million in the same period of 2024, indicating a growth of 22.5% [52]. Shareholder Returns and Investments - The company returned $670 million to shareholders through share repurchases and dividends in the first three quarters of 2025, repurchasing 2.5 million shares at a cost of $454 million [10]. - The company completed the acquisition of Meridian Adhesives Group's U.S.-based flooring adhesives business for $390 million, projected to generate annual revenue of $110 million in 2025 [13]. Balance Sheet and Debt - Net debt to adjusted EBITDA (non-GAAP) was 2.2x at the end of Q3 2025, indicating a strong balance sheet [11]. - Total current assets rose to $3,523.7 million as of September 27, 2025, compared to $3,084.7 million in the previous year, marking an increase of 14.2% [31]. - Total liabilities decreased to $6,655.9 million as of September 27, 2025, from $6,991.0 million a year earlier, reflecting a reduction of 4.8% [32]. - Long-term debt and finance leases increased to $3,202.3 million as of September 27, 2025, from $2,042.1 million a year earlier, indicating a rise of 56.7% [32]. - Total debt stood at $3,781.1 million, with net debt at $3,244.8 million as of the latest reporting period [58]. Guidance and Expectations - The company expects Q4 2025 reported EPS guidance to be between $2.15 and $2.25, with adjusted EPS guidance of $2.35 to $2.45 [6][16]. - The effective tax rate for Q3 2025 was reported at 29.2%, with an adjusted tax rate (non-GAAP) of 26.5% [14].

Core Insights - Avery Dennison reported quarterly earnings of $2.37 per share, exceeding the Zacks Consensus Estimate of $2.32 per share, and showing a slight increase from $2.33 per share a year ago, resulting in an earnings surprise of +2.16% [1][2] - The company generated revenues of $2.22 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.03% and reflecting a year-over-year increase from $2.18 billion [2] - The stock has underperformed, losing approximately 12.6% year-to-date compared to the S&P 500's gain of 14.5% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.42, with projected revenues of $2.25 billion, and for the current fiscal year, the EPS estimate is $9.47 on revenues of $8.83 billion [7] - The estimate revisions trend for Avery Dennison was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Containers - Paper and Packaging industry, to which Avery Dennison belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

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