Adhesive manufacturing company Avery Dennison (NYSE:AVY) beat Wall Street’s revenue expectations in Q1 CY2026, with sales up 7% year on year to $2.30 billion. Its non-GAAP profit of $2.47 per share was 1.8% above analysts’ consensus estimates.
Is now the time to buy AVY? Find out in our full research report (it’s free for active Edge members).
Avery Dennison (AVY) Q1 CY2026 Highlights:
- Revenue: $2.30 billion vs analyst estimates of $2.26 billion (7% year-on-year growth, 1.8% beat)
- Adjusted EPS: $2.47 vs analyst estimates of $2.43 (1.8% beat)
- Adjusted EBITDA: $376.5 million vs analyst estimates of $373.8 million (16.4% margin, 0.7% beat)
- Adjusted EPS guidance for Q2 CY2026 is $2.48 at the midpoint, below analyst estimates of $2.52
- Operating Margin: 11.8%, in line with the same quarter last year
- Organic Revenue rose 1.1% year on year (beat)
- Market Capitalization: $12.81 billion
StockStory’s Take
Avery Dennison delivered a positive first quarter, with management crediting strong performance in its Materials Group for offsetting softness in the Solutions Group. CEO Deon M. Stander highlighted that the Materials Group achieved mid single-digit growth in its base label categories, compensating for lower volumes in high value segments like Graphics and Reflectives. The company’s ability to manage raw material inflation—by implementing price increases and material reengineering—also supported profitability. Management noted that customer prebuying ahead of anticipated price hikes provided a temporary boost, particularly in March, but stressed that robust operational execution and cost control remain foundational to results.
Looking forward, Avery Dennison’s guidance is shaped by expectations of continued inflation, a return to growth in high value categories, and a significant ramp in Intelligent Labels during the second half of the year. CFO Gregory S. Lovins explained that price increases will be implemented globally to counter rising input costs, while productivity initiatives and restructuring are expected to drive further earnings growth. Management is closely monitoring the impact of customer prebuying and potential destocking in Q2, and remains focused on capital discipline, scenario planning, and innovation-led differentiation to navigate macroeconomic uncertainty. Stander stated, “We are going to see a significant ramp in the second half of the year, and sequentially our run rate of growth will improve as we go from here through the second half of the year.”
Key Insights from Management’s Remarks
Management attributed first quarter performance to resilient base label materials growth, effective inflation management, and proactive investments in technology platforms like Intelligent Labels.
-
Materials Group volume growth: Base label categories in the Materials Group delivered mid single-digit growth, helping to offset declines in high value categories such as Graphics, Reflectives, and Performance Materials. Management noted that successful customer share gains and prebuying ahead of price increases supported these results.
-
Solutions Group headwinds: The Solutions Group faced continued pressure, with sales down 1% organically due to weaker demand in base categories and higher employee-related costs. High value segments like VESCOM and Embellix grew mid single digits, but Intelligent Labels volumes were limited by logistics sector softness and inventory transitions.
-
Inflation and pricing response: Management highlighted a rapid shift from raw material deflation to inflation late in the quarter, prompting swift price increases across regions. The company leveraged its “playbook” to minimize price/inflation lag, using material reengineering and strategic sourcing to maintain margins.
-
Intelligent Labels platform update: Although Intelligent Labels sales were down slightly year over year, apparel and retail performed well, offset by logistics headwinds as customers managed inventory and transitioned to new chip technology. Management expressed confidence in a second-half sales ramp, particularly with large-scale food sector rollouts and new technology pilots.
-
Strategic investment in Williard: Avery Dennison invested $75 million in Williard to expand its Intelligent Labels platform, focusing on joint go-to-market efforts for condition monitoring in food, pharmaceuticals, and logistics. Management believes this expands the company’s addressable market by adding new sensing capabilities beyond traditional RFID.
Drivers of Future Performance
Avery Dennison’s outlook is influenced by persistent inflation, destocking risks, and the anticipated acceleration of Intelligent Labels and high value platforms.
-
Second-half Intelligent Labels ramp: Management expects Intelligent Labels growth to accelerate in the second half of the year, driven by new retail and food programs—including a major U.S. grocery rollout—and expanded pilots with logistics and apparel customers. This timing is expected to offset early-year headwinds and drive full-year growth.
-
Inflation management and pricing discipline: The company is responding to high single-digit input cost inflation by implementing price increases and leveraging operational productivity. While management expects some lag between input cost rises and realized pricing, their scenario planning aims to minimize margin impact and maintain earnings growth.
-
Productivity and restructuring focus: Increased restructuring savings (now targeted at over $55 million) and ongoing productivity efforts are central to offsetting wage inflation and growth investments. Management is balancing capital spending on innovation with disciplined share repurchases and M&A, aiming for sequential earnings growth through the year, barring significant macroeconomic deterioration.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace and scale of the Intelligent Labels ramp in food and retail, (2) the ability to offset inflation and wage pressures through pricing and productivity, and (3) the recovery trajectory in high value categories within both Materials and Solutions Groups. Execution on the Williard partnership and progress in logistics pilots will also serve as key indicators of strategic momentum.
Avery Dennison currently trades at $166.60, in line with $164.98 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
Our Favorite Stocks Right Now
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.