AptarGroup (ATR) Up 4.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for AptarGroup (ATR). Shares have added about 4.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AptarGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AptarGroup Q3 Earnings Beat Estimates, Revenues Rise Y/Y
AptarGroup reported third-quarter 2023 adjusted earnings per share of $1.39, beating the Zacks Consensus Estimate of $1.28. The bottom line increased 46.3% year over year from 95 cents (including comparable exchange rates).
On a reported basis, earnings per share were $1.26 compared with the year-ago quarter’s 81 cents.
Total revenues increased 6.7% year over year to $893 million in the reported quarter. The reported figure surpassed the Zacks Consensus Estimate of $890 million. Core sales, excluding currency and acquisition effects, improved 2% year over year due to strong volume growth in the pharma and beauty segments. We expected core sales to be up 5.5% in the quarter.
Operational Update
Cost of sales rose 3.7% year over year to $567 million. Gross profit improved 12.3% year over year to $326 million. The gross margin expanded to 36.5% in the reported quarter compared with the prior-year quarter’s 34.7%.
Selling, research, development and administrative expenses increased 2% year over year to $138 million. Adjusted operating income increased 35.9% year over year to $131 million. The adjusted operating margin was 14.6% in the reported quarter, up from the year-ago quarter’s 11.5%. Adjusted EBITDA rose 25.8% year over year to $193 million in the third quarter.
Segmental Performances
Total revenues in the Pharma segment increased 13.3% year over year to $389 million. The reported figure missed our estimate of $394 million. Adjusted operating income in the quarter rose 29.1% year over year to $108 million. We predicted a quarterly adjusted operating income of $107 million.
Total revenues in the Beauty segment increased 6.9% year over year to $324 million. Our estimation for the segment’s revenues was $316 million. Operating income improved 19.6% year over year to $20 million in the third quarter. The reported figure missed our operating income prediction of $21.5 million.
Total revenues in the Closures segment decreased 5.6% year over year to $180 million. We estimated revenues to be $179 million in the quarter. Operating income was $15 million in third-quarter 2023, reflecting growth of 40.6% from the year-ago quarter. Our prediction for the quarter was $13 million.
Financial Performance
AptarGroup reported cash and cash equivalents of $152 million as of Sept 30, 2023, up from $142 million as of Dec 31, 2022. The company generated $173 million of cash flow from operations in the third quarter of 2023 compared with $130 million in the prior-year quarter. As of Sept 30, 2023, the long-term debt was $680 million, down from $1,053 million as of Dec 31, 2022.
Outlook
AptarGroup estimates fourth-quarter 2023 adjusted earnings per share of $1.06-$1.14.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, AptarGroup has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AptarGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
AptarGroup belongs to the Zacks Containers - Paper and Packaging industry. Another stock from the same industry, Packaging Corp. (PKG), has gained 2.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Packaging Corp. reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of -8.9%. EPS of $2.05 for the same period compares with $2.83 a year ago.
Packaging Corp. is expected to post earnings of $1.79 per share for the current quarter, representing a year-over-year change of -23.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Packaging Corp. Also, the stock has a VGM Score of B.
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