Avery Dennison beats expectations on RFID growth
Label maker's strategic pivot toward technology-driven solutions drives 5% EPS beat, strong cash flow
Avery Dennison shares rose 1.2% on Wednesday after the industrial materials supplier reported better-than-expected fourth-quarter results, driven by strategic growth in its high-value technology segments including RFID labeling.
The Glendale, California-based company reported adjusted earnings per share of $2.45 for the quarter ended December 31, 2025, exceeding analyst estimates of $2.41 by approximately 2 cents, or roughly 5%. Net sales reached $2.3 billion, up 4% year-over-year and surpassing the consensus forecast of approximately $2.29 billion.
"We delivered another quarter of strong performance, with adjusted EPS and sales above our expectations," said Deon Stander, president and chief executive officer. "Our team executed well in a dynamic environment, and we continue to make progress on our strategic priorities."
The results underscore Avery Dennison's ongoing transformation from a traditional label manufacturer to a technology-driven enabler of item-level digital tracking. The company's High Value Categories (HVCs)—which include RFID-enabled smart labels and specialty materials—have expanded to approximately 45% of total sales, with RFID technology representing a rapidly expanding component.
RFID labels currently generate about 10% of total revenue, but these products are growing significantly faster than the company's other businesses and command superior margins. The overall RFID market is projected to grow at a compound annual growth rate of approximately 11-12% in the coming years, positioning Avery Dennison to capture expanding opportunities in sectors beyond its core apparel market.
"While about 70% of current RFID sales come from apparel, opportunities outside this sector are estimated to be ten times larger," analysts noted in a recent report, highlighting the company's potential in food and other consumer goods categories.
For the full year 2025, Avery Dennison reported adjusted EPS of $9.53 on net sales of $8.9 billion, both representing 1% year-over-year growth. The company maintained its commitment to shareholder returns, distributing $861 million to investors through dividends and share repurchases. Adjusted free cash flow reached $707 million, representing 103% conversion of adjusted net earnings, demonstrating strong operational efficiency.
Looking ahead, management provided first-quarter 2026 guidance for adjusted EPS in the range of $2.40 to $2.46, with organic sales growth projected at 0-2%. The company anticipates continued strength from its RFID initiatives, including a strategic partnership with Walmart that is expected to expand RFID adoption into new product categories.
Analysts remain largely positive on Avery Dennison's prospects. According to recent data, 13 analysts cover the stock with a consensus "Buy" rating, including eight "Strong Buy" recommendations. The average price target stands at approximately $204, suggesting upside potential from current levels around $186.82 per share.
Recent analyst actions reflect growing confidence in the company's strategic direction. In January 2026, Truist Securities maintained a "Strong Buy" rating and raised its price target to $234, while UBS upgraded the stock to "Strong Buy" with a $218 target, citing expectations for accelerated RFID technology growth and EPS improvements starting in 2026.
The company is investing over $100 million in a new RFID manufacturing facility in Querétaro, Mexico, to support its goal of providing every item with a unique digital identity. This strategic investment underscores Avery Dennison's commitment to scaling its RFID capabilities to meet growing demand across retail, logistics, and supply chain applications.
Despite modest overall revenue growth of 1% for fiscal 2025, the improving mix toward higher-margin technology solutions has begun to reshape Avery Dennison's valuation story. With a forward price-to-earnings ratio of approximately 17.6x, compared to a trailing P/E of 21.2x, investors appear to be positioning for stronger growth driven by the company's technology pivot.
As retail and supply chain operators increasingly adopt RFID technology for inventory accuracy and operational efficiency, Avery Dennison's established position as a leading provider of intelligent labeling solutions positions it to benefit from this secular trend. The company's 40% penetration in the apparel RFID market leaves significant runway for expansion, while the much larger addressable market in food and other consumer goods categories represents a multi-year growth opportunity.