Key Highlights

  • Adjusted EPS of USD 2.42 beat the consensus estimate of USD 2.32, rising 2.1%, while reported EPS was USD 2.24.
  • Net sales rose 5.2% to USD 2.33 billion, above the consensus estimate of USD 2.26 billion, on 3.7% organic growth.
  • Customer destocking cut sales growth by roughly 2 points and adjusted EPS by about USD 0.15 in the quarter.
  • Adjusted free cash flow reached USD 246.0 million, bringing the year to date figure to USD 715.8 million.

Avery Dennison Corporation (NYSE:AVY) reported third quarter 2026 adjusted earnings per share of USD 2.42, above a consensus estimate of USD 2.32 and up 2.1% from USD 2.37. Reported EPS under GAAP was USD 2.24 versus USD 2.13. Net sales of USD 2.33 billion rose 5.2% and topped a consensus estimate of USD 2.26 billion, with organic growth of 3.7% and a sales gain of more than 1 point from the Taylor Adhesives acquisition. Net income was USD 169.7 million.

Segment Margins Move in Opposite Directions

Materials Group sales climbed 8.5% to USD 1.64 billion, with organic growth of 4.9%, with mid single digit gains in both high-value and base categories. Adjusted EBITDA margin fell 110 basis points to 16.4% as productivity gains were outweighed by negative volume and mix, price pass through of raw material costs and higher employee related costs. Solutions Group sales declined 1.8% to USD 687.0 million, with organic growth of 0.8%, yet adjusted EBITDA margin widened 80 basis points to 17.8%.

Chief Executive Officer Deon Stander said destocking by customers is proceeding more gradually than planned. Management estimates underlying organic sales growth of about 6% and underlying adjusted EPS growth of about 8% once destocking is excluded. Intelligent Labels sales rose by a low single digit rate, with apparel and general retail up about 10%, food showing strong growth, and logistics down by double digits.

Guidance, Restructuring and Capital Returns

The company narrowed full year 2026 adjusted EPS guidance to USD 10.10 to USD 10.24, a slightly higher midpoint, and reported EPS guidance to USD 9.45 to USD 9.59, with an estimated USD 0.65 effect from restructuring charges and other items. The chief financial officer projected full year organic sales growth of about 3.5%, reported sales growth of about 5.5%, capital expenditures near USD 240 million and free cash flow conversion above 100%.

Restructuring actions produced about USD 54 million of pre-tax savings through three quarters against about USD 43 million of charges. The company returned USD 481 million to shareholders in the first nine months, including USD 257 million of share repurchases. Net debt to adjusted EBITDA was 2.2 times, and cash stood at USD 271.4 million.

Signposts for the Fourth Quarter

Several items from the call and release frame the next report. Management said the vast majority of remaining customer destocking from first half pre-buying is anticipated to conclude by the end of the fourth quarter, so the roughly 2 point sales effect seen in the third quarter is one marker. The calendar shift introduced this year is projected to weigh on fourth quarter sales growth by about 1.5%.

Margins are a second. Materials Group adjusted EBITDA margin of 16.4% against 17.5% a year earlier shows how pricing pass through and employee costs interact with volume. Third, a new Solutions Group president starts on November 3, and the segment margin of 17.8% sets the baseline. Fourth, adjusted free cash flow of USD 715.8 million year to date compares with USD 404.5 million a year earlier.