Avery Dennison Earnings: Inventory Destocking Finally Relents, Driving Revenue and Margin Growth

Narrow-moat Avery Dennison reported solid first-quarter results that came with few surprises. Organic sales increased 3% year over year as both the materials and the solutions groups experienced top-line growth. Consolidated operating margins expanded 260 basis points to 11.8% on a strong performance from the materials group. Destocking headwinds continue to moderate, which has relieved pressure on volumes and enabled margin expansion during the quarter. This is a welcome development for Avery after a challenging 2023, and we expect this trend will lead to solid earnings growth through 2024. As such, we've increased our fair value estimate to $158 from $154 per share due to higher near-term profitability in our forecast.