What Happened?
Shares of adhesive manufacturing company Avery Dennison (NYSE: AVY) jumped 6.9% in the morning session after the company reported mixed third-quarter results where a profit beat overshadowed weaker-than-expected guidance.
The adhesive manufacturing company posted adjusted earnings of $2.37 per share, beating Wall Street's estimates by 1.9%. Revenue for the quarter grew 1.5% year on year to $2.22 billion, which was in line with analyst expectations. Furthermore, the company's free cash flow margin improved to 12.1%, up from 10% in the same quarter last year, indicating better cash profitability. Investors appeared to look past the company's weaker guidance for the fourth quarter, which at a midpoint of $2.40 per share, came in below the consensus estimate of $2.44.
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What Is The Market Telling Us
Avery Dennison’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock gained 5% after the major indices popped (Nasdaq +3.4%, S&P 500 +2.5%) in response to the positive outcome of U.S.-China trade negotiations, as both sides agreed to pause some tariffs for 90 days, signaling a potential turning point in ongoing tensions.
This rollback cuts U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. imports to 10%, giving companies breathing room to reset inventories and supply chains. However, President Trump clarified that tariffs could go "substantially higher" if a full deal with China wasn't reached during the 90-day pause, but not all the way back to the previous levels.
Still, the agreement cooled fears of a prolonged trade war, helping stabilize expectations for global growth and trade flows and fueling renewed optimism. The optimism appeared concentrated in key trade-sensitive sectors, particularly technology, retail, and industrials, as lower tariffs reduce cost pressures and restore cross-border demand.
Avery Dennison is down 3.6% since the beginning of the year, and at $176.80 per share, it is trading 16.8% below its 52-week high of $212.39 from October 2024. Investors who bought $1,000 worth of Avery Dennison’s shares 5 years ago would now be looking at an investment worth $1,255.
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