AVY Financial Analysis

Analysis Date: 1/31/2025

Business Model

Avery Dennison generates revenue primarily through two segments: Materials Group and Solutions Group

Revenue Sources

• Materials Group (69% of revenue): Label materials, graphics & reflectives, performance tapes & medical
• Solutions Group (31% of revenue): Base solutions, intelligent labels, Vestcom, external embellishments

Revenue Distribution by Channel

• Materials Group: 69% of total revenue
• Solutions Group: 31% of total revenue

Income Statement Analysis

• Net sales increased 3.6% year-over-year to $2.19B
• Operating income grew 19.4% to $263.2M
• Operating margin expanded to 12.0% from 10.4%

Balance Sheet Analysis

• Strong balance sheet with net debt to adjusted EBITDA ratio of 2.0x
• Cash position improved 53% year-over-year to $329.1M

Cash Flow Analysis

• Generated strong adjusted free cash flow of $700M, up 18% vs prior year
• Maintained ~100% adjusted free cash flow conversion

Capital Allocation

Company maintains disciplined capital allocation strategy with strong balance sheet (2.0x leverage). Priorities include organic investment, dividends growing with earnings (10% CAGR over past 10 years), and strategic M&A/share repurchases. Returned $525M to shareholders in 2024 through dividends and share buybacks.

Management Commentary

Delivered strong results in 2024 with 19% earnings growth at high end of guidance

Both Materials and Solutions Groups delivered strong top and bottom-line results

Well-positioned to continue delivering GDP+ growth and top quartile returns

Overall Sentiment: Confident and positive about continued strong performance and execution of strategic initiatives

Recommendation

Rating: Buy

Reason for Rating: Strong execution, margin expansion, and multiple growth drivers support continued outperformance

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 8:04:06 AM