Report Date: Thursday, July 30, 2026 (before market open) | Call: 11:00 AM ET
AVY shares enter earnings at roughly $166, up sharply over the past week (from ~$155 on 7/23 to $169 on 7/28) but still down modestly on the year and underperforming the broader market. Sentiment is mixed: the stock carries a "Moderate Buy" consensus (nine Strong Buy, one Moderate Buy, four Hold among 14 analysts), with an average price target around $196-$200, implying meaningful upside from current levels. Recent target moves have been a bit choppy — BofA raised its target to $210 (Buy) on July 14, while Truist trimmed its target to $209 (still Buy) and Argus sits well below the pack at $175, reflecting some caution on the durability of the recovery narrative.
Consensus estimates for Q2: - Adjusted EPS: ~$2.46-$2.47 (vs. $2.42 a year ago, +~2%) - Revenue: ~$2.29-$2.30 billion (+~3% y/y)
This sits squarely inside the company's own guidance range of $2.43-$2.53 issued alongside Q1 results. Zacks notes AVY has beaten consensus EPS in each of the last four quarters (average surprise ~2.1%), though its "Earnings ESP" model is currently slightly negative, meaning the setup isn't as clearly skewed toward a beat as it has been recently.
Avery Dennison delivered a solid start to the year: adjusted EPS of $2.47 (up 7% y/y, above the midpoint of guidance) on organic sales growth of 1%, with mid-single-digit volume/mix growth offsetting deflation-related pricing headwinds. Materials Group did the heavy lifting (adjusted EBITDA up 12%), while Solutions Group margins compressed 80 bps on higher employee costs, softer base-category volumes, and continued growth investments.
Critically, management flagged that roughly $0.05 of Q1 EPS came from customer prebuying ahead of price increases — activity concentrated in the last few weeks of March that persisted into April. This prebuy is the single biggest swing factor for the Q2 print.
Management was explicit that this dynamic would largely reverse in Q2: "we currently expect this volume to largely unwind during the second half of Q2." That $0.05 prebuy tailwind becomes a ~$0.10 sequential swing (prebuy reversing plus the normal seasonal step-up not fully showing through), which is the main reason guidance implies roughly flat EPS sequentially versus Q1 despite Q2 typically being seasonally stronger.
Layered on top of this is a genuine inflation shock: raw material costs shifted from low-single-digit deflation in Q1 to high-single-digit sequential inflation expected in Q2, driven by petrochemical-linked commodities. Management's confidence hinges on their pricing playbook — CFO Greg Lovins indicated low-to-mid-single-digit sequential price increases to offset this, with a "slight overall net price increase" expected year-over-year in Q2, though a modest price-cost lag headwind could persist into Q3. Investors should watch: 1. Magnitude of the destocking hit to Materials Group label volumes 2. Price realization relative to the inflation curve (any gap here pressures margins) 3. Whether high-value categories (Graphics & Reflectives, Performance Materials) show the sequential improvement management promised after a soft Q1 tied to tough comps and auto-market softness
Materials Group — The steadier of the two segments. Q1 organic growth of ~2% was driven by strong base label materials (up mid-single digits across all regions) while high-value categories lagged. Watch for confirmation that Graphics/Reflectives and Performance Materials are inflecting positive as promised, and how margins hold up against the inflation spike.
Solutions Group — The more challenged segment (Q1 organic sales -1%, EBITDA margin down 80 bps). Vestcom and Embelex have been bright spots (mid-single-digit growth), while base categories and apparel remain soft. Key question: does margin pressure from wage inflation and growth investments persist, or does productivity start to offset it?
Intelligent Labels (Enterprise-wide platform) — This is the long-term growth story and the most closely watched sub-segment. Q1 sales were down low-single-digits overall — better than feared in apparel/general retail (up low-single-digits despite a tough tariff-related comp) but weak in logistics (down low-double-digits) due to softer customer demand and a chip transition at a key partner. Management reiterated that 2026 IL growth should outpace 2025, with performance "more heavily weighted towards the second half of the year" as the largest U.S. grocery retailer rollout (bakery, meat, deli) ramps and new apparel programs launch. Any commentary suggesting this second-half inflection is slipping would be a red flag; continued momentum in apparel and early signs of the food ramp would be reassuring. The recent incremental $75 million investment in Wiliot (Bluetooth-based condition-monitoring sensor technology, expanding the addressable market by an estimated 75 billion units long-term) is a strategic signal worth monitoring for updates on commercial traction.
Q1 saw $104 million in adjusted free cash flow and $133 million returned to shareholders ($72M dividends, $61M buybacks), with net debt/EBITDA at a comfortable 2.4x. Management uses a return-based, opportunistic buyback approach (accelerating purchases when the stock weakens, as it did in March). Given the stock's pullback into the low-$150s/high-$150s range in June and July before this week's bounce, it's worth watching whether repurchase activity picked up — this could be a modest tailwind to the print and a signal of management's confidence.
Full-year 2026 guidance context to reconcile against: a ~$0.25 net EPS tailwind from currency/share count (partly offset by tax/interest), restructuring savings raised to >$55 million, ~100% adjusted FCF conversion target, and ~$260 million of capital spending.
At the April 30, 2026 annual meeting, shareholders rejected a stockholder proposal for an independent Board Chairman (proposal failed, though it drew meaningful support — roughly 39% for vs. 61% against of votes cast). This isn't an earnings driver, but it's a live governance overhang analysts may probe on the call, particularly if activist pressure persists.
This is a transition-quarter print: guidance already bakes in a sequential EPS plateau as the March/April prebuy unwinds against a real inflation shock, so the bar is calibrated for roughly flat-to-modestly-up sequential earnings rather than the seasonal step-up investors might otherwise expect. The more important signal for the stock is likely to be forward-looking commentary — confirmation that pricing is tracking inflation, that high-value categories and Intelligent Labels are on track to inflect in the second half, and that full-year sequential earnings growth guidance remains intact. A beat-and-raise on Q2 combined with confident 2H commentary on the Walmart/food IL ramp would likely be well received given the stock's recent underperformance and the wide gap to analyst price targets; any hedging on the inflation/pricing offset or a further slip in the IL ramp timeline would raise concerns about the "resilient, diversified portfolio" thesis management has leaned on all year.