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On Thursday, JPMorgan analysts revised their outlook on Avery Dennison (NYSE:AVY), downgrading the stock rating from Overweight to Neutral. Accompanying this change, they also reduced the price target to $172.00 from the previous $205.00. According to InvestingPro data, the stock currently trades at a P/E ratio of 19.37x and has a market capitalization of $13.44 billion. InvestingPro’s Fair Value analysis suggests the stock is currently trading near its fair value. The adjustment follows Avery Dennison’s first-quarter results for 2025, which the analysts described as decent but highlighted several factors influencing their decision.
The company, which had experienced significant earnings per share (EPS) growth in 2024, saw a year-over-year EPS expansion of 35% in the first quarter of 2024. However, the latest quarterly report showed flat year-over-year sales and earnings. InvestingPro analysis reveals that Avery Dennison maintains a strong financial position with a GOOD overall health score and has consistently raised its dividend for 14 consecutive years, currently offering a 2.07% yield. According to the analysts, a slight increase in volumes and a minor decrease in prices were offset by currency headwinds, resulting in a lack of growth in sales and operating earnings compared to the previous year.
Avery Dennison’s Intelligent Labels segment reported low single-digit (LSD) growth, driven by higher volumes in the apparel sector. Additionally, the general retail category saw a boost from Walmart (NYSE:WMT) suppliers adopting radio-frequency identification (RFID) technology more widely. Despite these positive aspects, the overall performance did not translate into year-over-year growth in sales and operating earnings.
The analysts’ commentary provided insight into the factors influencing the downgrade and price target adjustment. They noted that while Avery Dennison managed to maintain steady sales and earnings, the company’s comparison to the robust EPS growth of the previous year and the various challenges faced in the recent quarter warranted a more cautious outlook on the stock.
Investors and market watchers will likely monitor Avery Dennison’s performance in upcoming quarters to see if the company can overcome the headwinds mentioned by JPMorgan and achieve growth that could potentially influence future stock valuations and analyst ratings. For deeper insights into AVY’s valuation and growth prospects, InvestingPro subscribers can access 8 additional ProTips and a comprehensive Pro Research Report, which is part of the platform’s coverage of over 1,400 US stocks.
In other recent news, Avery Dennison Corp reported its Q1 2025 earnings, revealing an adjusted EPS of $2.30, which fell short of the forecasted $2.32. The company also reported revenue of $2.15 billion, slightly below the expected $2.16 billion. These results reflect ongoing challenges, including tariff impacts and macroeconomic uncertainties. Despite the earnings miss, Avery Dennison demonstrated resilience with organic sales growth of 2% and an adjusted EBITDA margin increase to 16.4%. The company returned $331 million to shareholders through share repurchases and dividends. Looking ahead, Avery Dennison provided a cautious outlook for Q2, expecting adjusted EPS to range between $2.30 and $2.50, with a potential decline in apparel revenue. The company anticipates modest sequential earnings growth, supported by restructuring savings expected to exceed $45 million. Additionally, the Intelligent Labels segment showed mid-single-digit growth, indicating strong demand in key areas.
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