Adhesive manufacturing company Avery Dennison (NYSE: AVY) announced better-than-expected revenue in Q2 CY2026, with sales up 10.9% year on year to $2.46 billion. Its non-GAAP profit of $2.89 per share was 17% above analysts’ consensus estimates.

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Company Overview

Founded as Kum Kleen Products, Avery Dennison (NYSE: AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Avery Dennison’s 3.3% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Avery Dennison’s annualized revenue growth of 3.7% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Avery Dennison’s organic revenue averaged 2.1% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Avery Dennison reported year-on-year revenue growth of 10.9%, and its $2.46 billion of revenue exceeded Wall Street’s estimates by 7.3%.

Looking ahead, sell-side analysts expect revenue to grow 1.7% over the next 12 months, a slight deceleration versus the last two years. This projection doesn’t excite us and suggests its products and services will see some demand headwinds.

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Operating Margin

Avery Dennison’s operating margin has more or less stayed the same over the last 12 months , averaging 11.4% over the last five years. This profitability was solid for an industrials business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, Avery Dennison’s operating margin might have fluctuated slightly but has generally stayed the same over the last five years. We like to see margin expansion, but we’re still happy with Avery Dennison’s performance considering most Industrial Packaging companies saw their margins plummet.

This quarter, Avery Dennison generated an operating margin profit margin of 12.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Avery Dennison’s weak 2.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Although it wasn’t great, Avery Dennison’s two-year annual EPS growth of 6.5% topped its 3.7% two-year revenue growth.

Diving into the nuances of Avery Dennison’s earnings can give us a better understanding of its performance. While we mentioned earlier that Avery Dennison’s operating margin was flat this quarter, a two-year view shows its margin has expandedwhile its share count has shrunk 5.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q2, Avery Dennison reported adjusted EPS of $2.89, up from $2.42 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Avery Dennison’s full-year EPS to grow 3.5% from $10.18 to $10.54.

Key Takeaways from Avery Dennison’s Q2 Results

We were impressed by how significantly Avery Dennison blew past analysts’ organic revenue expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 8% to $180.48 immediately following the results.

Indeed, Avery Dennison had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).