AptarGroup (ATR) Beats Q2 Earnings on Margin Improvement - Analyst Blog
Shares of AptarGroup, Inc. ATR rose as much as 6.5% and closed at $66.35 yesterday, after the company reported record second-quarter 2015 earnings. Adjusted earnings per share improved 32% to 90 cents from 68 cents in the year-ago quarter. Earnings per share surpassed the company’s guidance of 66 cents and also came ahead of the Zacks Consensus Estimate of 75 cents.
Second-quarter adjusted earnings included a positive impact of approximately 8 cents related to change in accounting for inventories from the LIFO method to the FIFO method. Year-over-year earnings growth was driven by improved operating margins across each segment.
Notably, on a reported basis, earnings increased roughly 14% to 90 cents from 79 cents per share in the prior-year quarter. Reported quarter earnings do not include any adjustments.
Aptargroup Inc. - Earnings Surprise | FindTheBest
Operational Update
Total revenue declined 11% year over year to $594 million in the reported quarter. Revenues beat the Zacks Consensus Estimate of $591 million. Increase in demand across multiple markets drove volumes higher in Pharma and Food + Beverage segments, offset by weakness in the Beauty + Home segment. In addition, currency headwinds affected each business segment.
Selling, research, development and administrative expenses went down 7.4% year over year to $89.3 million. Operating income increased 12.9% year over year to $95.5 million. AptarGroup’s operating margin increased significantly by 340 basis points (bps) year over year to 16.1%. Focus on cost containment and volume increases drove the strong operating margins.
During the second quarter of 2015, AptarGroup changed the method of valuing inventories at two U.S. locations from LIFO to FIFO method, resulting in pre-tax income of approximately $7.4 million in the quarter.
Segmental Performance
Total revenue in the Beauty + Homes segment decreased 17% year over year to $319 million. Operating income remained flat at $27.2 million. The segment’s operating margin increased 140 bps year over year to 8.5%.
Total revenue in the Pharma segment fell 6.3% year over year to $183.3 million. Operating income increased 5% to $55.5 million from the year-ago quarter. Operating margin expanded 330 bps year over year to 30.3%.
Total revenue in the Food + Beverage segment went up 2.4% year over year to $91.8 million. Operating income also improved 20.7% year over year to $15 million. Operating margin increased 250 bps year over year to 16.3%.
Financial Performance
Cash and cash equivalents were $391.8 million at the end of second-quarter 2015 versus $399.8 million as of Dec 31, 2014. AptarGroup’s long-term debt increased to $813 million as of Jun 30, 2015 from $588.9 million as of Dec 31, 2014.
Outlook
For the third quarter of 2015, AptarGroup expects adjusted earnings to be approximately 65 cents per share. The company guided reported earnings in the range of 77 cents to 82 cents per share.
Our Take
AptarGroup’s commitment toward investing in research and development as well ad in the capital projects will aid long-term growth. The company expects to benefit from cost saving measures. However, uncertainty in foreign currency exchange rates remains headwind.
Crystal Lake, IL-based AptarGroup is a leading global supplier of a wide range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets.
At present, AptarGroup has a Zacks Rank #1 (Strong Buy). Some other stocks in the industrial products sector worth considering include Sealed Air Corporation SEE, Advanced Emissions Solutions, Inc. ADES and Apogee Enterprises, Inc. APOG. All these stocks carry a Zacks Rank #2 (Buy).
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