Avery Dennison: Navigating Uncertainty in the Labeling and Packaging Industry.

Avery Dennison Corporation is a manufacturer of labeling and packaging materials. The company operates through two segments: Materials Group and Solutions Group. With a market cap of approximately $5.75B, Avery Dennison has a diverse product portfolio including tags, adhesives, and labels.

Avery Dennison Corporation (NYSE: AVY) is a leading manufacturer of labeling and packaging materials, operating through two primary segments: Materials Group and Solutions Group. With a market capitalization of approximately $5.75 billion, the company's diverse product portfolio includes tags, adhesives, and labels, among other items.

Financial Performance

Over the past decade, Avery Dennison has demonstrated robust financial performance. The company's revenue per share (RPS) has grown at a solid 5.8% pace, reaching a peak of $110.8 per share in FY22 before declining slightly in FY23 [1]. The gross profit margin has been consistently high, with a chart high of nearly 29% in FY22. The return on invested capital (ROIC) has oscillated between 11% and 26.8% since FY15, with a target of exceeding 20% in the near future [1].

Dividend History

Avery Dennison has a strong dividend history, with a 15-year streak of dividend increases. The current yield is just north of 2%, with a 3- and 5-year dividend growth rate below 10% and a 10-year growth rate of exactly 10% [1]. The payout ratio has fluctuated but has trended lower, providing room for future increases.

Recent Earnings

In Q1 2025, Avery Dennison reported mixed earnings. The company missed analyst expectations for non-GAAP EPS by $0.01 per share and revenue by $10 million. The Materials Group saw a 1.1% decrease in revenue, while the Solutions Group experienced a 2% increase. Despite the mixed results, the stock rose 2% following the earnings release and has since climbed more than 4% [1].

Valuation

Valuation analysis suggests that Avery Dennison is trading for a small premium, with a fair price closer to $172. The projected long-term expected rate of return is 9.1%, driven by a forward dividend yield of 2.06%, a return to fair value factor of -1.17%, and an expected earnings growth rate of 8.21% [1].

Conclusion

Avery Dennison Corporation presents a mixed picture. While the company has demonstrated satisfactory financials, including a rising RPS, a reliable gross profit margin, and a decent ROIC, the recent earnings report was mixed, and the stock's valuation appears slightly overvalued. Given these factors, the stock is currently recommended as a hold.

References

[1] https://seekingalpha.com/article/4801210-avery-dennison-not-sure-what-to-do-with-you