AVY earnings analysis
What we found in AVY's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Avery Dennison delivered a strong Q2, with revenue up 10.9%, gross margin expanding to 29.6%, and GAAP diluted EPS rising 10.8% to $2.67. Materials Group drove the result, while Solutions Group remained broadly flat on reported sales and year-to-date profit. Cash generation and working-capital efficiency improved substantially, though higher restructuring, tax and interest costs—and elevated tariff uncertainty—remain key offsets.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue growth accelerated to 10.9%
- Q2 net sales rose 10.9% year over year to $2.4629B from $2.2205B and increased 7.2% sequentially from implied Q1 sales of $2.2985B. Organic sales rose 8%, primarily from higher volume, despite unfavorable mix.
- Gross margin expanded 80 basis points YoY
- Gross profit increased to $729.4M from $639.1M, lifting gross margin to 29.6% from 28.8% a year earlier and approximately 28.9% in Q1. GAAP operating margin was approximately 12.7%, versus 12.9% a year ago and approximately 11.8% sequentially.
- GAAP EPS rose 10.8% year over year
- GAAP diluted EPS increased to $2.67 from $2.41, while net income rose to $204.1M from $189.0M. The $2.67 GAAP result was below the separately reported adjusted EPS of $2.89, reflecting $21.1M of other expense, including restructuring.
- Materials delivered double-digit organic growth
- Materials Group was the principal growth engine: sales increased $245.9M to $1.7961B and adjusted operating income increased $41.5M to $284.0M. Organic sales grew 10%, supported by higher volume, customer inventory stocking and pricing actions.
- Cash conversion improved sharply
- First-half operating cash flow was $544.7M, up from $192.5M, and adjusted free cash flow was $469.8M versus $135.8M. Capital expenditures were $67.5M, equal to 1.4% of first-half sales of $4.7614B.
- Working-capital efficiency strengthened
- Operational working capital improved to 13.2% of annualized quarterly sales from 15.2% a year ago; inventory turnover improved to 6.7x from 6.2x and DSO declined to 66 days from 67 days.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Solutions reported sales remain pressured
- Solutions Group Q2 sales declined 0.5% to $666.8M from $670.3M despite 3% organic growth, and first-half segment sales fell 1.7% to $1.3160B from $1.3385B. First-half adjusted operating income was essentially flat at $135.0M versus $135.2M.
- Restructuring charges increased materially
- Other expense increased to $21.1M in Q2 from $0.5M, including $18.6M of restructuring-related severance, impairment and lease-cancellation charges. The company recorded $34.7M of 2026 restructuring charges in the first half tied to a reduction of approximately 600 positions.
- Higher tax rate constrains earnings
- The effective tax rate increased to 27.8% from 26.0% in Q2 and to 28.8% from 26.4% year to date. Management expects the full-year effective tax rate to remain in the high-20% range.
- Interest expense is trending higher
- Interest expense rose to $35.9M from $34.0M in Q2 and to $71.5M from $64.9M year to date, primarily due to €500M of senior notes issued in September 2025. Management also expects higher interest expense for full-year 2026.
- Tariff and geopolitical exposure remains elevated
- The updated risk factor cites evolving tariffs: the U.S. applied new 10.0% and 12.5% tariffs on certain imports from 60 countries in July 2026. The company estimates tariff effects reduced overall apparel-category sales at a low-single-digit rate across Q2 through Q4 2025; 69% of 2025 sales originated outside the U.S.
- Capital returns and investment use liquidity
- Cash and equivalents were $227.3M at June 30, while total debt was $3.68B, although debt declined approximately $55M in the first half. The company used $198.2M for repurchases, paid $148.5M in dividends, and made an approximately $75M minority investment in Wiliot during the first half.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $2.67
- Gross margin
- 29.6%
- Operating margin
- 12.7%
- Segment
- Materials Group: Q2 net sales $1.7961B, up 15.9% year over year from $1.5502B; segment adjusted operating income $284.0M versus $242.5M.
- Segment
- Solutions Group: Q2 net sales $666.8M, down 0.5% year over year from $670.3M; segment adjusted operating income $76.5M versus $67.0M.
What they said about what is next.
The 10-Q does not provide numeric revenue or EPS guidance. Management expects favorable foreign-currency translation to support full-year 2026 net sales and operating income, incremental restructuring savings net of transition costs, higher interest expense, and a full-year effective tax rate in the high-20% range; it also expects operating-income pressure from normalization of prior-year temporary cost actions.
The filing reads better than the one before it.
What came before.
- 10-Q · May 4, 2026
- Avery Dennison reported a strong Q1 2026, with revenue of $2.299 billion, a 7% increase from the prior year and exceeding consensus estimates. Diluted EPS improved to $2.47, beating expectations of $2.42, driven by…
- 10-K · February 25, 2026
- Avery Dennison positions itself as a global materials-science and digital-identification leader with a two-segment model (Materials Group and Solutions Group) and a strong international footprint. The 2025 10-K…
- 10-K · February 26, 2025
- Avery Dennison positions itself as a global materials science and digital identification solutions company, with a two-segment model (Materials Group ~69% of 2024 net sales; Solutions Group ~31%). The company emphasizes…
- 10-K · February 22, 2023
- Avery Dennison’s 2022 Form 10-K describes a strategic realignment into two reportable segments (Materials Group and Solutions Group), continued international scale (~72% of net sales outside the U.S.), and targeted…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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