Avery Dennison posts adjusted earnings of $2.42 per share, beating third-quarter estimates
Key Facts
Avery Dennison on October 29 reported preliminary, unaudited results for the third quarter ended September 30, 2026, posting adjusted earnings of $2.42 per share and net sales of $2.3 billion. Adjusted earnings per share beat analysts’ estimate of $2.32 by $0.10, while sales also topped the market estimate of $2.26 billion. Adjusted earnings per share rose 2.1% from the same quarter a year earlier, while net sales increased 5.2% and organic sales grew 3.7%. Reported earnings per share were $2.24, below the adjusted figure, which excludes nonrecurring items under the company’s measure. The beat came as the company faces higher inflation and the impact of customers reducing inventories.
A detailed comparison shows adjusted earnings per share rose from $2.37 in the third quarter of 2025 to $2.42 in the latest period. Net sales increased from $2,215.5 million to $2,331.5 million, consistent with the reported revenue growth. For the nine months ended September 30, 2026, organic sales growth was 4.1%, while net sales rose 7.7% from the same period in 2025. These figures reflect a stronger year-to-date cumulative sales trajectory than the organic growth rate in the quarter alone. They also highlight the gap between reported and organic sales growth in the quarter, with the former at 5.2% versus 3.7% for the latter.
Performance varied between the two business groups: Materials Group sales rose 8.5% to $1.6 billion, but adjusted operating margin fell 110 basis points to 14.1%. In Solutions Group, sales declined 1.8% to $687 million, while adjusted operating margin improved 80 basis points to 10.8%. This means revenue growth was concentrated in Materials Group, without a corresponding improvement in its operating margin. Solutions Group, meanwhile, combined lower sales with a higher margin, presenting a different picture from the other group. The results thus show that beating revenue estimates does not reflect uniform growth across the company’s businesses.
Chief Executive Deon Stander said innovation and service-led differentiation drove mid-single-digit organic growth in high-value categories and core businesses. He added that the company faced higher inflation and the effects of customers reducing inventories at the same time. The company estimated organic sales growth of about 3.5% for 2026, assuming most of the remaining inventory reduction would occur in the fourth quarter. It also forecast reported sales growth of about 5.5% for the year and noted an approximately 1.5% calendar headwind to fourth-quarter sales. Management said the outlook assumes most of the inventory correction will be absorbed in the coming period, making the fourth quarter an important test of actual performance against those assumptions.
On Walmart, the chief executive said the program’s timing had shifted slightly, with the rollout now expected to begin in 2027, while teams work through the commercialization phases. Walmart and Avery Dennison announced a collaboration in October 2025 to introduce RFID technology to fresh food categories, including meat, bakery and prepared foods. The shift of the rollout to 2027 delays when the program is expected to begin contributing to the business, while teams continue working through its commercial phases. Stander said, "The timing has shifted slightly, and we expect the actual rollout to begin in 2027." This timeline comes alongside the company’s expectation that most of the remaining customer inventory reduction will occur in the fourth quarter.
On liquidity, adjusted free cash flow was $246 million in the third quarter and $715.8 million in the first nine months of 2026, compared with $404.5 million in the same period a year earlier. Net debt to adjusted earnings before interest, taxes, depreciation and amortization was 2.2 times at the end of the quarter. After the results were announced, the stock rose 0.23% in premarket trading on October 29, according to Investing.com. On the same day, Walmart shares closed at $121.21, according to EL7 data. These financial indicators and the share price response place the company’s results in the context of sales growth, margin pressures and the timing of the anticipated fresh food program expansion.