* Q3 adjusted EPS $0.81 vs estimate of $0.74
* Q3 Sales of $1.72 bln vs estimate of $1.67 bln
* Cuts FY08 profit outlook
* Sees higher raw material costs in '08
* Shares fall 8 pct (Recasts; adds analyst comments, updates share movement)
By Biswarup Gooptu
BANGALORE, Oct 21 (Reuters) - Avery Dennison Corp (AVY.N) reported third-quarter profit that beat analysts' estimates, but shares fell 8 percent as the office supplies maker cut its fiscal 2008 outlook, citing uncertain market conditions and a slowing economy.
The company slashed its full-year outlook by more than a fifth, saying the slowdown in the United States was extending to Europe and Asia as well.
In a statement, the company said it expects customer inventory reductions to hurt sales in the fourth quarter.
The company now expects full-year earnings of $3.15 to $3.35 a share, excluding items. On the same basis, analysts were expecting a profit of $3.47 a share, according to Reuters Estimates.
Edward Jones analyst Dan Ortwerth said the industrial sector, hurt by a weak macroeconomic environment, is set to see more cuts in earnings guidance.
"Knowing just how weak business is for Avery Dennison these days, I would have been truly surprised if they didn't come down from where they were," Ortwerth said by phone.
Avery Dennison also increased its estimate for raw material inflation in 2008 to about $125 million from about $110 million, and said it plans to pass on the higher costs through price increases.
For the latest third quarter, the company posted net income of $62.7 million, or 63 cents a share, compared with $58.8 million, or 59 cents a share, in the year-ago period. For earnings details, click on [ID:nWNAB9121]
Revenue growth at the company's largest segment, which makes pressure-sensitive materials, dropped to 8 percent.
Revenue at the other two segments -- retail information services and office and consumer products -- fell by 2 percent each, hurt by a slowdown in consumer spending.
Analyst Ortwerth said Avery Dennison is too dependant on consumer spending patterns and the acquisitions it has made have ended up diversifying it into areas that are heavily dependant on a healthy consumer.
"We are not only dealing with a weak economy, but also with a 'scared consumer,' the effects of which are being felt by Avery Dennison," he said.
Shares of the company were down $2.13 at $34.29 in afternoon trade on the New York Stock Exchange. They touched a low of $33.11 earlier in the session. (Reporting by Biswarup Gooptu in Bangalore; Editing by Amitha Rajan, Anil D'Silva)