Avery Dennison Corp. Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the fiscal second quarter ended June 30, 2026, and the six-month period year-to-date. Avery Dennison Corporation is a large accelerated filer headquartered in Mentor, Ohio, operating globally in the Materials and Solutions segments. The company reported 75,788,142 shares of common stock outstanding as of August 1, 2026.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $2,462.9 million | $2,220.5 million | $4,761.4 million | $4,368.8 million |
| Gross Profit | $729.4 million | $639.1 million | $1,394.2 million | $1,260.6 million |
| Net Income | $204.1 million | $189.0 million | $372.2 million | $355.3 million |
| Diluted EPS | $2.67 | $2.41 | $4.85 | $4.50 |
| Operating Cash Flow (YTD) | $544.7 million (vs. $192.5 million YTD 2025) | |||
| Adjusted Free Cash Flow (YTD) | $469.8 million (vs. $135.8 million YTD 2025) | |||
| Total Debt (Carrying Value) | $3.68 billion (as of June 30, 2026) | |||
| Cash and Equivalents | $227.3 million (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 11% in Q2 and 9% YTD. Organic sales growth was 8% in Q2 and 4% YTD, driven primarily by higher volume, partially offset by unfavorable mix and raw material deflation-related price reductions.
- Profitability: Net income rose 8% in Q2 and 5% YTD. Gross margin expanded due to volume, pricing benefits, and productivity initiatives, though offset by higher employee costs and unfavorable mix.
- Restructuring: The company recorded $34.7 million in restructuring charges YTD 2026 (vs. $12.9 million YTD 2025), primarily for severance related to ~600 positions and asset impairments to optimize the operational footprint.
- Cash Flow: Operating cash flow surged to $544.7 million YTD, a significant increase from $192.5 million in the prior year, driven by improved operational working capital management.
- Investments: The company completed a $75 million minority investment in Wiliot Ltd. in April 2026 to expand sensor technology capabilities.
Guidance, Outlook, and Risks
- Outlook: Management anticipates a favorable impact from foreign currency translation on full-year net sales and operating income. However, they expect higher interest expense and an unfavorable impact from the normalization of prior-year temporary cost-saving actions (specifically lower incentive compensation).
- Tax Rate: The full-year effective tax rate is expected to be in the high-twenty percent range.
- Dividends: The quarterly dividend was increased to $1.00 per share in April 2026 (from $0.94).
- Share Repurchases: The company repurchased approximately 1.2 million shares YTD 2026. As of June 30, 2026, approximately $333.0 million remained available under the current repurchase authorization.
- Risks: Key risks include global economic conditions, geopolitical instability (Middle East, Russia-Ukraine), trade tariffs (including new U.S. tariffs applied in July 2026), raw material costs, and foreign currency fluctuations. The company notes that indirect tariff impacts resulted in a low single-digit sales decrease in apparel categories in late 2025.
Investor Verification Checklist
- Restructuring Execution: Verify the timeline and cost savings realization from the 2026 restructuring actions involving 600 positions.
- Tariff Impact: Monitor the resolution of U.S. tariff litigation and the potential refund processing for unliquidated tariffs, as well as the impact of new tariffs applied in July 2026.
- Working Capital Trends: Confirm the sustainability of the significant improvement in operational working capital that drove the YTD cash flow increase.
- Wiliot Investment: Assess the strategic integration and potential ROI of the $75 million investment in Wiliot Ltd.
- Debt Covenants: Review compliance with the financial covenant on the $1.20 billion revolving credit facility (total debt minus unrestricted cash).