Avery Dennison Earnings: End-Market Demand Rebounds as Inventory Destocking Yields

Narrow-moat Avery Dennison reported second-quarter results that were largely in line with our expectations. Net sales rose almost 7% year over year as both segments experienced growth, while consolidated operating margin expanded almost 400 basis points to 11.7%. This margin expansion was mainly driven by higher volumes in the quarter and a favorable mix. Many of the destocking headwinds that have weighed on Avery for over a year now have abated, enabling the company to return to more-normalized operations and capitalize on end-market demand. As such, we've increased our fair value estimate to $166 from $158 per share due to higher near-term revenue and profitability in our forecast.