Avery Dennison Q4 Earnings Call Highlights

Key Points

• Avery Dennison reported full‑year 2025 adjusted EPS of $9.53 and $707 million of adjusted free cash flow, maintained a 16.4% adjusted EBITDA margin, returned about $860 million to shareholders (including $572 million in buybacks) and finished the year with net debt/adjusted EBITDA of 2.4.
• In Q4 adjusted EPS was $2.45 (up ~3%) and reported sales rose 3.9% while organic sales were flat; Materials sales grew ~5% but saw margin pressure, while Solutions grew ~1.5% with a stable 17.8% margin and Intelligent Labels posted mid‑single‑digit growth driven by food and logistics as apparel lagged.
• For Q1 2026 management guides 0%–2% organic sales growth, 5%–7% reported sales growth and adjusted EPS of $2.40–$2.46, and plans to target roughly 100% free cash flow conversion in 2026 using productivity, restructuring (~$50 million savings) and new program rollouts (including a Walmart fresh‑grocery ramp) to drive growth.

Avery Dennison NYSE: AVY executives said the company delivered “solid” results in 2025 despite trade policy changes and softer consumer sentiment, while outlining a quarterly outlook framework for 2026 amid what management described as a dynamic operating environment.

Full-year 2025 results and margin focus

Chief Executive Officer Deon Stander said the company generated full-year 2025 adjusted earnings per share of $9.53 and $707 million of adjusted free cash flow. Stander said Avery Dennison maintained an adjusted EBITDA margin of 16.4% for the year by leaning on its “productivity playbook” and multiple levers across the portfolio.

Chief Financial Officer Greg Lovins said the company’s full-year adjusted free cash flow conversion was greater than 100%. Lovins also noted a quarter-end net debt to adjusted EBITDA ratio of 2.4, which he described as a strong balance sheet position.

In capital allocation, management said Avery Dennison returned about $860 million to shareholders in 2025, including $572 million in buybacks and $288 million in dividends.

Fourth-quarter performance: EPS up, organic sales flat

For the fourth quarter, Lovins said adjusted EPS was $2.45, up 3% year over year, driven by higher volume and productivity, partially offset by higher employee-related costs and targeted growth investments.

Reported sales increased 3.9% in Q4, while organic sales were comparable to the prior year as volume gains were offset by deflation-related price reductions. Lovins said reported sales benefited from an estimated 1.5-point impact from a shift to the Gregorian calendar at year-end and 1 point from the Taylor Adhesives acquisition.

Adjusted EBITDA margin was 16.2% in the quarter, down slightly year over year. Q4 adjusted free cash flow was $303 million, according to Lovins.

Segment results: Materials mixed; Solutions held margin

Materials Group reported sales increased 5%, though organic sales were down slightly. Stander said low single-digit volume and mix growth was more than offset by deflation-driven price reductions. Avery Dennison’s “high-value categories” represented 38% of the Materials Group portfolio, and Stander said that figure is expected to expand with a full year of Taylor Adhesives.

Within Materials Group, Stander said:

• Intelligent Labels delivered high single-digit growth.
• Performance Materials grew mid-single digits.
• Graphics and Reflectives grew low single digits.

Materials Group adjusted EBITDA margin was 16.6%, down 40 basis points year over year. In response to a question about the margin decline, Lovins pointed to softer base volumes, wage inflation, small one-time items that benefited the prior-year quarter, and the impact of four additional calendar days that carried fixed costs but relatively soft shipping days due to timing around the New Year.

Solutions Group sales increased roughly 1.5%, with Lovins citing 1.3% organic growth. Stander emphasized that Solutions continues to lead Avery Dennison’s portfolio shift, with high-value categories comprising 60% of the segment’s portfolio. However, base apparel was below expectations and was down roughly 7% in Q4 as customers balanced inventory and evaluated post-tariff pricing decisions.

Within Solutions Group high-value platforms, management said:

• Vestcom grew more than 10%, driven by new program rollouts.
• Embelex delivered high single-digit growth, with Lovins noting World Cup-related sales as a partial driver.
• Intelligent Labels in Solutions grew low single digits, tempered by apparel and general retail consumption trends.

Solutions Group adjusted EBITDA margin was 17.8%, comparable to the prior year and nearly a point higher sequentially, as productivity and favorable mix offset higher employee-related costs and ongoing investments, management said.

Intelligent Labels: growth driven by food and logistics; apparel pressured

Across the enterprise, Intelligent Labels sales grew mid-single digits in Q4. Management said apparel and general retail trends were impacted by tariff policy changes, resulting in flat full-year sales for those areas, while food, logistics, and other categories grew high teens in Q4 and approximately 10% for the full year. Lovins added that food, logistics, and industrial categories now represent about 30% of the Intelligent Labels portfolio, with apparel and general retail representing 70%.

Looking to 2026, Stander said the company expects Intelligent Labels growth to be above 2025’s pace, with stronger growth in the second half as Avery Dennison laps a stronger Q1 2025 and as new programs roll out. He also highlighted a major fresh grocery rollout with Walmart, with revenues expected to ramp in the back half of 2026. In logistics, management said it plans to expand pilots with additional customers following a year of outsized growth with its largest customer, while also factoring in that customer’s lower volume outlook for the year.

2026 outlook: Q1 guidance and key moving pieces

Management reiterated it will provide quarterly outlooks “for the foreseeable future,” citing limited visibility in a dynamic environment after several years of one-off cyclical disruptions, including the pandemic, inflation, supply chain issues, destocking, and tariff impacts.

For Q1 2026, Avery Dennison expects:

• Organic sales growth of 0% to 2%, with Stander citing no assumed macro tailwinds.
• Reported sales growth of 5% to 7%, including about 4% from currency translation and about 1% from Taylor Adhesives.
• Adjusted EPS of $2.40 to $2.46, which management said implies about 6% growth at the midpoint.

Lovins said earnings growth in Q1 is expected to be driven by organic volume/mix growth and productivity actions, offsetting wage inflation and growth investments, as well as the normalization of 2025 temporary savings. On the bridge to full-year 2026 factors discussed on the call, Lovins cited an expected $0.25 EPS benefit from favorable currency and a lower share count (partly offset by higher tax rate and interest expense), about $50 million of restructuring savings, and the normalization of 2025 temporary savings largely tied to lower incentive compensation.

On cash flow and investment, Lovins said the company is targeting roughly 100% free cash flow conversion again in 2026, with fixed and IT capital spending of approximately $260 million. He also noted that 2025 capital spending was $200 million, plus roughly $30 million of cloud technology investments recorded in operating cash flow.

Stander said the company is taking “decisive action” to improve organic growth, pointing to expanding high-value categories, accelerating innovation commercialization, and using digital capabilities, automation, and AI to strengthen productivity and shorten innovation cycles. He also said Avery Dennison achieved its 2025 sustainability objectives set in 2015 and is making progress toward its 2030 goals.

About Avery Dennison NYSE: AVY

Avery Dennison NYSE: AVY is a global materials science and manufacturing company specializing in labeling and packaging solutions. The company develops pressure-sensitive materials, tags and labels, and adhesive technologies that help brands and businesses enhance product identification, branding and supply-chain performance. Avery Dennison's offerings range from industrial and retail labeling to high-performance tapes, films and graphics materials used across multiple end markets.

The company operates through several key segments, including Label and Graphic Materials, which supplies pressure-sensitive materials for consumer goods; Retail Branding and Information Solutions, offering apparel tags, RFID inlays and digital product identification; Pressure-Sensitive Materials, providing specialty tapes and adhesives; and RF Technologies, focused on advanced RFID and IoT labeling solutions.

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