Avery Dennison Corporation

Second-quarter reported sales were up 11% year over year, with organic sales growth of 8%, roughly two points of foreign currency translation benefit and a point of growth from the Taylor Adhesives acquisition. Adjusted EPS was $2.89, up 19% year over year; adjusted EBITDA margin was 17.1%, up 50 bps; and adjusted free cash flow was $365 million. Management said customer inventory pre-buys added an estimated $0.25 to Q2 earnings, and that roughly half of Q2 organic growth came from that activity. For the full year 2026, Avery Dennison guided to adjusted EPS of $10.00 to $10.30 and organic sales growth of 3% to 4%; reported sales growth is expected to be 5% to 6%, including about 1.5% currency, 1% Taylor Adhesives, and a near-half-point fiscal calendar headwind. The company also said it is targeting roughly 100% free cash flow conversion and about $260 million of fixed and IT capital spending, while Q3 is expected to see about a $0.50 sequential EPS headwind as pre-buys unwind.

Deon Stander emphasized that the quarter showed stronger underlying execution, with accelerating organic growth, margin expansion, and resilient performance across the portfolio. He repeatedly pointed to the company’s playbook of innovation-led differentiation, pricing and productivity actions, and disciplined capital allocation as the drivers of growth and resiliency. His tone was confident but cautious, noting that Q2 benefited from Materials pre-buys and that the second half will depend on how destocking and inflation evolve.

Gregory Lovins quantified the quarter and the outlook in detail: adjusted EPS was $2.89, organic sales rose 8%, adjusted EBITDA margin was 17.1%, and adjusted free cash flow was $365 million. He said the balance sheet remained strong at 2.3x net debt to adjusted EBITDA, and the company returned over $210 million to shareholders in Q2, including $76 million of dividends and $138 million of share repurchases. On costs, he said Q2 raw material inflation was mid-single-digit year over year and high-single-digit sequentially, and he expects high-single-digit year-over-year inflation in the second half. He also said restructuring benefits will exceed $60 million for the year, fixed and IT capex should be about $260 million, and Q3 should reflect roughly a $0.50 sequential EPS headwind from inventory unwind.

Analysts focused on the scale and timing of customer pre-buys in Materials, the implied destocking in Q3 and Q4, and whether price actions can offset inflation. Management said about $0.30 of first-half benefit came from stocking, with roughly $0.25 of that expected to reverse in Q3 and the rest in Q4, mostly in Europe and Asia; they also said the stocking issue is mainly a Materials phenomenon, not Solutions or Intelligent Labels. Questions also centered on Intelligent Labels growth, especially food and logistics: Deon said apparel and general retail remain strong, logistics will remain challenged versus 2025, and food should contribute more in the second half, led by bakery, protein and later perishable categories. On the Q3 EPS downtick, Greg clarified the company expects about a $0.50 sequential headwind from Q2 to Q3, but said the exact phasing between Q3 and Q4 is still uncertain.