Company Overview - Avery Dennison's 2024 net sales reached $8.8 billion[8] - The Materials Group accounted for 69% of sales, while the Solutions Group represented 31%[8] - High-value categories constitute approximately 44% of sales, showing a 10 percentage point increase compared to 2019[11] - The U S market accounts for approximately 40% of sales[11] Growth Strategy - The company is targeting over 5% sales growth, excluding currency impacts[27] - This growth is expected to be driven by approximately 1 percentage point from base business growth, 2 percentage points from high-value categories, and 1.5+ percentage points from Intelligent Labels[26] - Intelligent Labels are projected to grow at a rate of 15%+[26] Financial Performance and Capital Allocation - From 2014 to 2024, the adjusted EBITDA margin increased from 11 3% to 16 4%[23] - The company plans to allocate capital with 25-30% for capex/restructuring, ~20% for dividends, and 50-55% for buybacks/M&A[30] - Approximately $8 billion of capital is available for deployment between 2024 and 2028[31]

Core Insights - Meridian has entered into a definitive agreement to divest its Flooring Adhesives Division to Avery Dennison, which will integrate the brands into its Materials Group business, aiming for accelerated innovation and expanded reach [1][2][3] Company Overview - Meridian Adhesives Group is a leading manufacturer of high-performance adhesives, providing solutions across various markets including electronics, product assembly, infrastructure, packaging, and flooring [3] - Avery Dennison Corporation is a global leader in materials science and digital identification solutions, reported sales of $8.8 billion in 2024, and employs approximately 35,000 employees in over 50 countries [4]

Core Insights - The company reported adjusted earnings per share (EPS) of $2.42 in Q2 2025, reflecting a 5% sequential increase but remaining roughly flat year-over-year [4][28]. - Trade policy uncertainty negatively impacted results, particularly in the apparel and general retail categories, leading to a 6% decline in apparel sales during the quarter [2][20]. - Management expressed dissatisfaction with the current growth trajectory, especially within the Intelligent Labels (IL) platform, and anticipates continued low single-digit declines in apparel volumes for Q3 2025 [3][9]. Financial Performance - Adjusted EBITDA margin was 16.6% in Q2 2025, up 20 basis points compared to the prior year [5][29]. - Adjusted free cash flow reached nearly $190 million in Q2 2025 [5][30]. - The net debt to adjusted EBITDA ratio stood at 2.3 at the end of the quarter [5][29]. Sales and Revenue Trends - Organic sales decreased by 1% in Q2 2025 compared to the previous year, with positive volume mix offset by deflation-related price reductions [5][28]. - The Materials Group experienced a 1% organic sales decline, while high-value categories saw low single-digit growth [6][31]. - Sales in the Graphics and Reflective segment increased by high single digits year-over-year [7][32]. Segment Performance - The Solutions Group's sales were down 1% organically in Q2 2025, but outside of apparel and general retail, sales increased by low double digits [8][33]. - The Vescom segment reported a 10% sales increase due to successful program rollouts at CVS Health [8][33]. - Embellix sales declined in Q2 2025 due to lower sourcing demand and slower orders from U.S. performance brands [8][22]. Regional Performance - North America and Asia Pacific saw organic volume mix increases in the low to mid-single digits, while Europe experienced a decline in the low to mid-single digits [7][31]. - Latin America also reported low single-digit organic volume mix growth [7][31]. Guidance and Outlook - The company expects adjusted EPS for Q3 2025 to be in the range of $2.24 to $2.40, with the midpoint comparable to the prior year [9][34]. - Management anticipates a $50 million restructuring savings target for the year and expects to return to year-over-year adjusted EPS growth in Q4 2025 if macro conditions remain stable [13][36]. - The full-year outlook has been adjusted to reflect a $7 million benefit to operating income from currency translation, compared to a previous headwind projection [10][35]. Strategic Initiatives - The company confirmed its ability to mitigate tariff impacts through strategic sourcing adjustments and targeted pricing surcharges [13][18]. - New product launches in food and logistics have delivered returns on investment exceeding expectations [11][70]. - The company maintains a strong balance sheet with ample capacity for organic investment, M&A, dividends, and share buybacks [15][26]. Market Position and Competitive Landscape - The company remains a market leader in over 80% of its portfolio, with a focus on high-value categories that provide differentiated growth potential [25][72]. - Despite challenges in the apparel sector, the company sees significant growth opportunities in the Intelligent Labels market, which is projected to be an $8 billion opportunity [74]. - The competitive intensity in the industry remains balanced, with the company anticipating a slight increase in market share as it rolls out new technologies and solutions [72][73].

Core Points - The earnings conference call for Avery Dennison took place for the second quarter ended on June 28, 2025 [2] - The call included various corporate participants, including the President, CEO, and CFO [1] - Non-GAAP financial measures were referenced during the discussion, with definitions and reconciliations provided in the accompanying financial statements [4]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.42, up 5% sequentially and comparable to the prior year, with strong free cash flow of nearly $190 million in the quarter [17][18] - Adjusted EBITDA margin was strong at 16.6%, up 20 basis points compared to the prior year [18] - Sales were down 1% on an organic basis compared to the prior year, primarily due to deflation-related price reductions [17][18] Business Line Data and Key Metrics Changes - The Materials Group sales were down 1% on an organic basis, with modest volume mix growth offset by low single-digit deflation-related price reductions [19][20] - Solutions Group sales were also down 1% organically, with high-value categories up low single digits, while base solutions were down mid-single digits [22] - VESCOM, a suite of productivity solutions, was up roughly 10% in the quarter due to successful rollouts [10][22] Market Data and Key Metrics Changes - North America saw low to mid-single-digit organic volume mix growth, while Europe was down low to mid-single digits due to a strong prior year [19][20] - Apparel sales were down 6% in the quarter, with overall apparel and general retail categories experiencing reduced orders and inventory levels [8][11] - Food and logistics categories showed strong growth, with food up mid-teens collectively [11][22] Company Strategy and Development Direction - The company is taking a cautious approach to forward expectations, anticipating third-quarter earnings per share to be comparable to the prior year [13][24] - The focus remains on high-value categories and emerging markets, with a strong balance sheet allowing for organic and M&A investments [14][52] - The company is committed to improving network efficiency and expanding innovation, particularly in the Intelligent Labels platform [15][66] Management's Comments on Operating Environment and Future Outlook - Management noted that trade policy uncertainty impacted results, particularly in apparel and general retail categories [17][30] - Despite challenges, management expressed confidence in long-term earnings progression and the ability to navigate dynamic environments [15][24] - The company anticipates a return to earnings growth in the fourth quarter, assuming no significant macro shifts [25][41] Other Important Information - The company announced a 7% increase in the quarterly dividend to $0.94 per share, continuing a decade-long trend of annual growth [19] - The company returned approximately $500 million to shareholders through share repurchases and dividends in the first half of the year [18] Q&A Session Summary Question: Can you speak to whether you see pent-up demand and potential quicker turnarounds in the second half? - Management noted continued retail sales volume softness in Europe and muted customer sentiment, with expectations of low single-digit demand in apparel and general retail overall [30][31] Question: What are the expected volumes for the back half of the year? - Management reiterated that apparel business is expected to be down low single digits in Q3, with growth anticipated in Intelligent Labels in the second half [34][37] Question: What are the exit rates in your materials businesses into the third quarter? - Exit rates for the Materials Group were relatively flat overall, with slight improvements noted in June [98] Question: What is the outlook for Embellix and its reliance on global sporting events? - Management expects growth in Embellix to begin in Q4, with confidence in the long-term growth trajectory despite challenges in the apparel market [84][98] Question: How is the rollout with CVS going for VESCOM? - The rollout with CVS is progressing well, with strong growth anticipated as the company continues to leverage data for shelf-edge labeling solutions [86][87]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.42, up 5% sequentially and comparable to the prior year, with strong free cash flow of nearly $190 million in the quarter [15][16] - Adjusted EBITDA margin was strong at 16.6%, up 20 basis points compared to the prior year [16] - Sales were down 1% on an organic basis compared to the prior year, primarily due to deflation-related price reductions [15][16] Business Line Data and Key Metrics Changes - Materials Group sales were down 1% on an organic basis, with high-value categories up low single digits and base business down low single digits [18][19] - Solutions Group sales were down 1% organically, with high-value categories up low single digits and base solutions down mid single digits [21] - The Solutions Group achieved an adjusted EBITDA margin of 17.1%, up 30 basis points compared to the prior year [22] Market Data and Key Metrics Changes - North America saw low to mid single-digit growth in organic volume mix, while Europe was down low to mid single digits [19] - Apparel sales were down 6% in the quarter, with overall apparel and general retail categories experiencing reduced orders and inventory levels [6][10] - Food and logistics categories showed strong growth, with food sales up mid-teens collectively [10][21] Company Strategy and Development Direction - The company is focused on leveraging its global scale, innovation, and go-to-market strategy to maintain competitive advantages in large growing markets [12][13] - There is an emphasis on expanding high-value categories and pursuing new projects in food and logistics [10][12] - The company plans to continue disciplined capital allocation, including share repurchases and dividends, while exploring M&A opportunities to enhance high-value category contributions [52][54] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the third quarter, expecting earnings per share to be comparable to the prior year amid trade policy uncertainties [12][15] - The company anticipates a normalization of growth in apparel and general retail categories over time, despite current softness [10][11] - Management remains confident in the long-term growth trajectory, particularly in high-value categories and emerging markets [13][72] Other Important Information - The company announced a 7% increase in its quarterly dividend to $0.94 per share, continuing a decade-long trend of annual dividend growth [17] - The company is actively managing its global network to reduce inefficiencies and associated costs due to shifts in trade policies [11] Q&A Session Summary Question: Can you speak to whether you see pent-up demand and potential quicker turnarounds in the second half? - Management noted continued retail sales volume softness in Europe and muted customer sentiment, with expectations of low single-digit demand in apparel and general retail overall [29][30] Question: What are your expectations for volumes in the back half of the year? - Management anticipates growth in Intelligent Labels in the third quarter and expects new programs to gain traction in the fourth quarter [38][42] Question: What impact do you expect from the closure of Kroger stores on your deployments? - Management stated that the rollout with Kroger continues as planned, with no significant impact from store closures on their deployments [78] Question: What are the expectations for growth in the Embellix business? - Management expects growth in the Embellix business to begin in the fourth quarter, driven by performance brands and upcoming sporting events [86][100] Question: How is the company managing tariff cost impacts? - Management indicated that they largely offset tariff-related costs in Q2 through strategic pricing and sourcing shifts, with expectations to continue this in Q3 [91][92]

Core Insights - Avery Dennison Corporation (AVY) reported adjusted earnings of $2.42 per share for Q2 2025, surpassing the Zacks Consensus Estimate of $2.38, with year-over-year earnings remaining flat [1][10] - Total revenues decreased by 0.7% year over year to $2.22 billion, slightly missing the Zacks Consensus Estimate of $2.23 billion [2][10] - The company expects adjusted EPS for Q3 2025 to be between $2.24 and $2.40 [8] Financial Performance - The cost of sales increased by 0.6% year over year to $1.58 billion, leading to a gross profit decline of 3.6% to $639 million [2] - Marketing, general, and administrative expenses were reduced to $352 million from $374 million in the previous year, with adjusted operating profit around $287 million, flat compared to the prior year [3] - The adjusted operating margin remained stable at 12.9% [3] Segment Performance - Revenues in the Materials Group segment rose by 0.2% year over year to $1.55 billion, exceeding estimates, but organic sales fell by 1% [4] - The Solutions Group experienced a 2.6% revenue decline year over year to $670 million, with organic sales down by 0.8% [5] Cash and Debt Position - Avery Dennison returned $503 million to shareholders through share repurchases and dividends in the first half of 2025, repurchasing 2 million shares [6] - The company ended the quarter with cash and cash equivalents of $216 million, up from $209 million a year ago, while long-term debt increased to $2.63 billion from $2.05 billion [7] Stock Performance - Avery Dennison shares have declined by 18.7% over the past year, compared to a 6.1% decline in the industry [11]

Financial Performance - The company reported net sales of $2.2 billion [16] - Organic sales decreased by 1.0% [16, 20, 29, 33] - Adjusted EPS was $2.42, comparable to the prior year [13, 16] - Adjusted EBITDA margin increased by 20 bps to 16.6% [18] - Strong adjusted free cash flow (FCF) was $189 million [17] Segment Performance - Materials Group reported sales increased 0.2% to $1.6 billion [29] - Solutions Group reported sales decreased 2.6% to $670 million [33] - High-value categories delivered sales of approximately $1.0 billion, up low single digits (LSD) organically and up mid-single digits (MSD) excluding estimated impact of tariffs [19] - Base categories delivered sales of approximately $1.2 billion, down LSD organically [19] Outlook and Strategy - The company expects adjusted EPS of $2.24 to $2.40 in Q3 2025 [14, 42] - The company anticipates slight sales growth versus the prior year [44] - The company is targeting approximately 100% adjusted FCF conversion [44]

Net Sales- Solutions Group: $670.3 million versus the three-analyst average estimate of $678.75 million. The reported number represents a year-over-year change of -2.6%. Net Sales- Materials Group: $1.55 billion versus $1.55 billion estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +0.2% change. Adjusted Operating income (loss)- Corporate expense: $-22.8 million versus the three-analyst average estimate of $-26.36 million. Adjusted Operating income (loss)- So ...

Over the last four quarters, the company has surpassed consensus EPS estimates three times. Avery Dennison, which belongs to the Zacks Containers - Paper and Packaging industry, posted revenues of $2.22 billion for the quarter ended June 2025, missing the Zacks Consensus Estimate by 0.5%. This compares to year-ago revenues of $2.24 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the re ...