Avery Dennison — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net sales for Q3 2026 were $2.33 billion, a 5.2% increase year-over-year (YoY); sales change excluding currency was up 4.9%, and organic sales change was up 3.7%.
• Reported earnings per share (EPS) for Q3 2026 were $2.24; adjusted (non-GAAP) EPS was $2.42, up 2.1% YoY.
• Reported net income for Q3 2026 was $169.7 million, up 2.0% YoY; adjusted net income was $183.3 million, down 0.8% YoY.
• Adjusted operating margin for Q3 2026 was 12.1%, down from 12.7% in the prior year period.
• Adjusted EBITDA margin for Q3 2026 was 15.8%, down from 16.5% in the prior year period.
• Adjusted free cash flow for Q3 2026 was $246.0 million, compared to $268.7 million in the prior year period.
• Year-to-date (YTD) adjusted free cash flow for the first nine months of 2026 was $715.8 million, up from $404.5 million in the prior year period.
• Net debt to adjusted EBITDA (non-GAAP) was 2.2x at the end of the third quarter.
• The reported effective tax rate was 29.6% for the three months ended September 30, 2026; the adjusted tax rate was 26.9%.

Guidance and Future Outlook:

• Full-year 2026 reported EPS guidance is $9.45 to $9.59.
• Full-year 2026 adjusted EPS guidance is $10.10 to $10.24, excluding an estimated $0.65 impact of restructuring charges and other items.

Business Segments and Product Lines:

• Materials Group: Reported sales of $1.64 billion, up 8.5% YoY; sales change excluding currency was up 6.7%, and organic sales change was up 4.9%. High-value and base categories both grew mid-single digits. Volume/mix growth was low single digits, and price benefit was mid-single digits. Adjusted operating margin was 14.1%, down 110 basis points YoY.
• Solutions Group: Reported sales of $687 million, down 1.8% YoY; sales change excluding currency was up 0.8%, and organic sales change was up 0.8%. High-value categories were comparable to the prior year, base categories grew low single digits, and overall apparel categories grew mid-single digits. Adjusted operating margin was 10.8%, up 80 basis points YoY.
• Cost reduction actions generated approximately $54 million in pre-tax savings through the first three quarters of 2026, with $43 million in pre-tax restructuring charges incurred.

Market and Competitive Landscape:

• Management noted that innovation and service-led differentiation drove mid-single digit organic growth in high-value categories and base businesses.
• The company faced headwinds from higher inflation and customer destocking impacts during the quarter.
• Significant risk factors include global economic conditions, tariffs, geopolitical uncertainty, and changes in environmental standards.

Risks and Challenges:

• Risks include fluctuations in demand, cost and availability of raw materials, foreign currency fluctuations, and competitive actions regarding pricing and product offerings.
• Geopolitical risks involve trade relations, tariffs, conflicts in the Middle East, and the Russia-Ukraine war.
• Execution and integration of acquisitions, as well as the ability to pass on higher costs to customers without significant volume loss, are cited as key risks.

Management Commentary and Tone:

• Deon Stander, President and CEO, stated the company delivered "another quarter of strong results" highlighted by continued improvement in underlying organic sales and earnings growth.
• Management credited global teams for demonstrating "strong operational agility" and generating "impressive free cash flow" despite inflation and destocking.
• The tone emphasized a strengthening competitive moat and commitment to executing through the balance of the year.

Other Key Points:

• During the first three quarters of 2026, the company returned $481 million to shareholders via share repurchases and dividends.
• The company repurchased 1.5 million shares in the first three quarters of 2026, with total payments of $257 million.
• Net share count decreased by 1.9 million compared to the same time last year.
• The company employs approximately 35,000 people in more than 50 countries.
• Reported sales for 2025 were $8.9 billion.