J.P. Morgan has downgraded Avery Dennison (AVY) from “Overweight” to “Neutral,” trimming its price target to $172. The downgrade follows a first quarter that delivered stable but uninspiring results—sales and operating earnings were flat year-over-year, with only modest volume improvements.
🔍 Avery’s Intelligent Labels segment posted low single-digit growth, mainly driven by increased demand from apparel brands and a broader rollout of RFID solutions by Walmart suppliers. While this indicates long-term potential, it wasn’t enough to shift the broader growth trajectory this quarter.
💸 A key concern is weak free cash flow during the quarter, which could limit Avery’s ability to fund strategic initiatives without taking on more risk. Adding to that caution, the company suspended its full-year earnings guidance, citing uncertain economic conditions—raising a red flag for near-term visibility.
💰 Dividend Fundamentals:
💵 Avery Dennison currently pays a quarterly dividend of $0.88, or $3.52 annually, translating to a forward yield of 2.07%.
📈 With a dividend payout ratio at 40.1%, slightly above the industrial sector average, Avery has room to maintain distributions but less cushion if cash flow continues to lag.
📆 The company boasts a 16-year streak of dividend increases, underscoring its shareholder-focused approach even amid turbulence.
📌 Bottom Line:
While Avery Dennison remains a well-run company with dependable dividends, J.P. Morgan’s downgrade highlights mounting concerns around growth stagnation and cash flow pressure. Investors may prefer to wait for clearer signs of reacceleration before taking new positions.