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The earnings call summary and Q&A highlight strong growth prospects in high-value categories, positive impacts from the Walmart partnership, and disciplined capital allocation. Despite uncertainties in the apparel market and cautious management responses, the company's focus on innovation and strategic partnerships is promising. The expectation of revenue and earnings growth, along with optimistic guidance, supports a positive outlook. However, the lack of annual guidance and some cautious responses temper the positivity slightly, keeping the sentiment from being 'Strong positive.'
Adjusted EPS (Earnings Per Share) $9.53 for the full year 2025, with a 3% increase in Q4 to $2.45. The increase was driven by higher volume and productivity, partially offset by higher employee-related costs and targeted growth investments.
Adjusted Free Cash Flow $707 million for the full year 2025, with $303 million generated in Q4. This reflects strong cash flow conversion rates exceeding 100%.
Adjusted EBITDA Margin (Materials Group) 16.6% in Q4, down 40 basis points year-over-year. The decline was due to higher employee-related costs and the absence of one-time benefits from the prior year, partially offset by productivity actions.
Adjusted EBITDA Margin (Solutions Group) 17.8% in Q4, comparable to the prior year. This was achieved through productivity efforts and a favorable high-value mix, offsetting higher employee-related costs and growth investments.
Reported Sales (Materials Group) Increased by 5% in Q4, though organic sales were down slightly due to deflation-related price reductions offsetting low single-digit volume and mix growth.
Reported Sales (Solutions Group) Increased by approximately 1.5% in Q4, with high-value categories growing high single digits and base solutions down mid-single digits due to softer base apparel sales.
Enterprise-wide Intelligent Label Sales Grew mid-single digits in Q4, driven by high teens growth in food, logistics, and industrial categories, partially offset by low single-digit declines in apparel and general retail due to tariff-related pressures.
Free Cash Flow Conversion Rate Greater than 100% for the full year 2025, reflecting strong cash flow management.
Shareholder Returns $860 million returned to shareholders in 2025, including $572 million in buybacks and $288 million in dividends.
Intelligent Labels: Delivered high single-digit growth in Q4 2025, with food, logistics, and industrial categories growing high teens. Apparel and general retail categories were flat for the year but showed low single-digit growth in Q4.
Vestcom: Grew more than 10% in Q4 2025, driven by new program rollouts.
Embelex: Delivered high single-digit growth in Q4 2025, partially driven by World Cup sales.
Cleanflake portfolio: Expanded to more packaging substrates to advance circularity.
Smart materials: Introduced to accelerate Intelligent Label adoption.
Food traceability: Adoption set to accelerate through a major fresh grocery rollout with Walmart, with revenues ramping in the back half of 2026.
Logistics: Focused on expanding pilots with new customers after a year of outsized growth with the largest customer.
High-value categories: Expanded to represent 45% of sales in 2025, up 12 points since 2019.
Productivity playbook: Helped maintain adjusted EBITDA margin of 16.4% for 2025, despite higher employee-related costs.
Digital capabilities and AI: Expanded to enhance operational productivity, fixed cost innovation, and data-driven solutions.
Restructuring savings: Expected to save approximately $50 million in 2026.
Portfolio shift: High-value categories now represent 60% of the Solutions Group portfolio and 38% of the Materials Group portfolio.
Sustainability objectives: Achieved 2025 goals, including reducing energy intensity and enabling more sustainable products. Progressing towards 2030 objectives.
Capital allocation: Returned approximately $860 million to shareholders in 2025, including $572 million in buybacks and $288 million in dividends.
Trade policy changes and tariff-related uncertainty: Ongoing trade policy changes and tariff-related uncertainty have negatively impacted the company's base apparel business and general retail sales, leading to softer customer volumes and inventory adjustments.
Softer consumer sentiment: Weaker consumer sentiment has created headwinds for the business, affecting demand and contributing to lower-than-expected sales in certain categories.
Higher employee-related costs: Increased employee-related costs have pressured margins, requiring the company to implement productivity measures to partially offset these expenses.
Deflation-related price reductions: Price reductions due to deflation have offset volume and mix growth in some segments, impacting overall revenue growth.
Cyclical challenges and slower organic revenue growth: The company has faced cyclical challenges that have slowed organic revenue growth, prompting the need for decisive actions to improve growth trajectories.
Tariff costs and raw material deflation: Tariff costs and modest raw material deflation have required strategic sourcing adjustments and pricing surcharges to mitigate financial impacts.
Dependence on high-value categories: The company's reliance on high-value categories to offset declines in base categories poses a risk if growth in these areas slows or fails to meet expectations.
Macroeconomic uncertainties: Key economic indicators remain consistent with 2025 levels, with no anticipated macroeconomic tailwinds, creating a challenging environment for growth.
Growth in Intelligent Label Platform: Sales in the Intelligent Label platform are expected to grow above the pace achieved in 2025, with stronger growth anticipated in the second half of 2026. Apparel and general retail are expected to return to growth, while food adoption will accelerate through a major rollout with Walmart, and logistics will expand pilots with new customers.
First Quarter 2026 Financial Guidance: Adjusted earnings per share are expected to grow approximately 6% at the midpoint, with organic sales growth projected at 0% to 2%. Reported sales growth is anticipated to be 5% to 7%, including contributions from currency translation and acquisitions.
Full Year 2026 Financial Projections: The company expects sequential earnings growth throughout the year, targeting roughly 100% free cash flow conversion with fixed and IT capital spending of approximately $260 million. Restructuring savings of approximately $50 million are anticipated, along with normalization of temporary savings from 2025.
High-Value Categories Expansion: The company plans to expand high-value categories, which have been growing at a mid-single-digit CAGR over the past six years, to new customers and end markets. This includes innovations in Intelligent Labels for food traceability, Vestcom Storelink software, and Embelex's Custom Studio Fanzones.
Productivity and Innovation Focus: The company will continue to focus on productivity and innovation, including the use of automation and AI to enhance operational efficiency, shorten innovation cycles, and provide data-driven solutions. This is expected to strengthen market positions and drive growth.
Dividends Paid: $288 million in dividends were paid to shareholders in 2025.
Share Buybacks: $572 million was spent on share buybacks in 2025.
The earnings call summary and Q&A highlight strong growth prospects in high-value categories, positive impacts from the Walmart partnership, and disciplined capital allocation. Despite uncertainties in the apparel market and cautious management responses, the company's focus on innovation and strategic partnerships is promising. The expectation of revenue and earnings growth, along with optimistic guidance, supports a positive outlook. However, the lack of annual guidance and some cautious responses temper the positivity slightly, keeping the sentiment from being 'Strong positive.'
The earnings call summary and Q&A session highlight several positive aspects, such as the Walmart partnership, which is expected to drive significant growth, and improvements in Intelligent Labels and Embelex. Despite some concerns about margins and macro uncertainties, the overall sentiment is optimistic, especially with the strategic importance of new partnerships and technology advancements. The company's resilience and growth strategies, along with optimistic guidance, suggest a positive stock price movement in the near term.
The earnings call summary highlights strong growth in high-value categories, solid margins, and promising performance in emerging markets. The Q&A reveals optimism about growth in food and grocery, IL, and Embelex, despite some concerns about tariffs and apparel demand. The company's strategic actions, such as share buybacks and innovation, further bolster a positive outlook. Overall, the combination of strong performance in key areas and strategic initiatives suggests a positive stock price movement.
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