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AptarGroup (ATR) Earnings Miss, Revenues Meet Estimates in Q3

Zacks Equity Research

AptarGroup, Inc. ATR delivered third-quarter 2019 adjusted earnings per share of 93 cents, missing the Zacks Consensus Estimate of 95 cents by a margin of 2.1%. Further, the bottom line declined 4% year over year.

On a reported basis, the company recorded earnings of 85 cents per share compared with the year-ago quarter’s 60 cents.

Total revenues improved 5% year over year to $701 million in the September-end quarter. The top-line figure comes in line with the Zacks Consensus Estimate. Core sales growth and acquisitions contributed 4% each, while currency exchange rates unfavorably impacted sales by 3%. Strong broad-based demand for drug delivery and food dispensing solutions drove top-line core growth during the quarter.

Operational Update

Cost of sales was up 2% to $444 million from the $435 million recorded in the year-ago quarter. Gross profit increased 11.3% year over year to $257 million. Gross margin came in at 36.7% during the July-September quarter, up from the prior-year quarter’s 34.7%.

Selling, research, development and administrative expenses rose 7.7% year over year to $111.5 million. Adjusted operating income went up 5.4% year over year to $89.6 million. Operating margin remained flat, year on year, at 12.7%. Adjusted EBITDA increased 9.3% year over year to $146.8 million in the reported quarter.

AptarGroup, Inc. Price, Consensus and EPS Surprise

AptarGroup, Inc. Price, Consensus and EPS Surprise

AptarGroup, Inc. price-consensus-eps-surprise-chart | AptarGroup, Inc. Quote

Segmental Performance

Total revenues in the Beauty + Homes segment declined 4% year over year to $328.2 million. Adjusted operating income in the third quarter was down 7.2% year over year to $20.7 million. Increased sales to the beauty and home care markets were offset by weak demand from the personal care market.

Total revenues in the Pharma segment jumped 18.3% year over year to $269.2 million. Broad-based demand for industry-leading drug delivery devices drove this segment’s top-line growth. Adjusted operating income climbed 11.2% year over year to $79.7 million in the third quarter.

Total revenues in the Food + Beverage segment were up 7.6% year over year to $103.8 million. Operating income grew 12.8% year over year to $9.7 million. Rising demand in the food market muted the softer product demand from the beverage market.
 
Financial Performance

AptarGroup reported cash and cash equivalents of $270.5 million at the end of the reported quarter, up from $262 million as of Dec 31, 2018. At the quarter’s end, long-term debt was approximately $1,075 million, down from $1,125 million as of Dec 31, 2018.

AptarGroup's board has announced quarterly cash dividend of 36 cents per share. The dividend is payable on Nov 20, to shareholders of record as of Oct 30, 2019.

Acquisitions

On Oct 31, AptarGroup acquired Noble International for $62 million. Noble is a leader in drug delivery training devices and patient onboarding. The acquisition backs AptarGroup’s strategy to broaden service portfolio for pharmaceutical and biotech customers.

Also, AptarGroup has announced the appointment of leadership positions in certain segments.
 
Recently, AptarGroup signed an agreement to acquire 49% equity interest in three related BTY companies in China, in a bid to capitalize on the high-growth Asian color cosmetics market.
 
Outlook
 
AptarGroup expects weaker fourth-quarter 2019 results compared with the solid performance witnessed in the year-ago period. Customers in the Beauty + Home segment are destocking, due to political and economic uncertainties, while the Pharma segment’s expansion in the allergy sector is expected to revert to a more normalized growth rate.

AptarGroup now projects adjusted earnings per share (EPS) for fourth-quarter 2019 between 74 cents and 80 cents. It also reflects a higher tax rate of 30-32%. The company reported adjusted EPS of 92 cents in the prior-year quarter.

Share Price Performance

Shares of the company have gained around 8.8% over the past year, as against the industry’s decline of 25.2%.



Zacks Rank & Stocks to Consider

AptarGroup currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Sharps Compliance Corp SMED, Plug Power Inc. PLUG and Cintas Corporation CTAS. While Sharps Compliance sports a Zacks Rank #1 (Strong Buy), Plug Power and Cintas carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sharps Compliance has an expected earnings growth rate of a whopping 500% for the ongoing year. The company has appreciated 39.1% so far this year.

Plug Power has a projected earnings growth rate of 2.8% for the current year. The stock has gained 124.2% so far this year.

Cintas has an estimated earnings growth rate of 12.74% for 2019. Shares of the company have rallied 60% year to date.

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