Adhesive manufacturing company Avery Dennison (NYSE: AVY) met Wall Street’s revenue expectations in Q1 CY2025, but sales were flat year on year at $2.15 billion. Its GAAP profit of $2.09 per share was 10.5% below analysts’ consensus estimates.
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Avery Dennison (AVY) Q1 CY2025 Highlights:
- Revenue: $2.15 billion vs analyst estimates of $2.16 billion (flat year on year, in line)
- EPS (GAAP): $2.09 vs analyst expectations of $2.34 (10.5% miss)
- Adjusted EBITDA: $352.4 million vs analyst estimates of $353.4 million (16.4% margin, in line)
- Operating Margin: 11.9%, in line with the same quarter last year
- Free Cash Flow was -$59.9 million, down from $64.1 million in the same quarter last year
- Organic Revenue rose 2.3% year on year, in line with the same quarter last year
- Market Capitalization: $13.81 billion
“We delivered a strong first quarter, in-line with expectations,” said Deon Stander, president and CEO.
Company Overview
Founded as Kum Kleen Products, Avery Dennison (NYSE: AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.
Industrial Packaging
Industrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Avery Dennison’s sales grew at a sluggish 4.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Avery Dennison’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Avery Dennison’s organic revenue was flat. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Avery Dennison’s $2.15 billion of revenue was flat year on year and in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Avery Dennison has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.5%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Avery Dennison’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. We like to see margin expansion, but we’re still happy with Avery Dennison’s performance considering most Industrial Packaging companies saw their margins plummet.
This quarter, Avery Dennison generated an operating profit margin of 11.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Avery Dennison’s unimpressive 4.7% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
Although it wasn’t great, Avery Dennison’s two-year annual EPS growth of 2.2% topped its flat revenue.
In Q1, Avery Dennison reported EPS at $2.09, down from $2.13 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Avery Dennison’s full-year EPS of $8.69 to grow 15.9%.
Key Takeaways from Avery Dennison’s Q1 Results
This was an in line quarter, with revenue and EBITDA meeting expectations. Operating margin was unchanged compared to the same quarter last year. The stock remained flat at $174.50 immediately following the results.
Avery Dennison’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
