AptarGroup (ATR) Gains From Solid Demand and Strategic Actions
AptarGroup, Inc. ATR has been gaining from its business transformation plan and improved organizational effectiveness. Innovative product launches and acquisitions are also fueling growth.
AptarGroup’s Beauty segment will gain from the increased demand for the beauty and personal care markets. The Pharma segment is witnessing steady demand growth for prescription and consumer healthcare.
Shares of this Zacks Rank #2 (Buy) company have gained 20.7% in the past year compared with the industry’s growth of 0.7%.
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Impressive Strategic Actions to Aid Growth
AptarGroup has been focused on business transformation plans to drive top-line growth, boost operational excellence, enhance its approach to innovation and improve organizational effectiveness.
The company has primarily been focused on transforming its Beauty segment, adding capabilities in Asia, implementing commercial strategies, reducing costs and capitalizing on fast-growing application fields. The company’s cost-control measures and pricing actions will help sustain margins in the upcoming quarters.
Effective Jan 1, 2023, the company realigned its segments to better serve customers. It has combined all its closure operations into a single segment, Aptar Closures. The business serves diverse markets, including food, beverage, personal care, home care, beauty and healthcare.
Meanwhile, the company is simplifying its previous Beauty + Home segment to better leverage its complex spray and dispensing solutions for prestige and premium brands in the beauty and personal care markets. The realignment is expected to strengthen AptarGroup's market position in closures and beauty by more closely aligning it with how its customers are structured.
The action positions the company even better to enter markets for its closure technologies. Furthermore, it improves the bottom line by capturing efficiencies and streamlining operations.
Solid Segmental Performance Drives Margins
The Pharma segment is witnessing healthy demand for its proprietary dispensing devices used for nasal decongestants, eye care, cough and cold, and saline rinses, as well as allergic rhinitis, emergency medicines and depression therapies. Demand for elastomeric components has also been strong, including that for biologics.
Given the ongoing sales momentum in elastomer components and active material solutions, AptarGroup is expanding its capacity to produce elastomer components for injected medicines and active material science solutions, which will drive near-term growth. Also, recently, the FDA approved Narcan for over-the-counter use, which is expected to boost the segment’s growth. The Pharma segment is expected to gain from the ramp-up of the distribution channel for Narcan.
The Beauty segment is seeing higher sales in prestige and mass fragrance, along with sales growth of skin care and color cosmetic solutions.
Focus on Expansion & Innovation Boosts Growth
AptarGroup has been committed to expanding its business through acquisitions to expand the scope of technologies, geographic presence and product offerings.
It is poised to gain from innovative product launches and continues to be the preferred choice for renowned brands worldwide. The Pharma segment’s proprietary nasal spray device is the delivery solution for a new migraine treatment that has received FDA approval in the United States.
ATR’s nasal spray pumps have been featured on a growing number of allergy medications, with notable launches in Latin America and Europe. The proprietary ophthalmic squeeze dispenser continues to drive growth and has been featured in several launches in Europe, including Ocutears Hydro+ by Santen, and in Brazil, Viofta by EMS.
In the Beauty segment, AptarGroup’s spray pumps continue to be chosen as the dispensing solution for several new fragrances by renowned brands. The dispensing pump is now part of the Revlon Illuminance foundation in North America. Star Drop, which ensures precise dispensing, is being used for a new skincare product in China.
The company’s mono-material, fully recyclable pump continues to be featured on new products, including Avene's new skin care product, Xeracalm, in Europe.
In the Closures segment, the custom inverted closure with a self-sealing flow control valve has been chosen as the dispensing solution for the launch of another inverted dish soap brand by a leading CPG company.
In the North America personal care market, the segment is providing disc top closures for two Unilever brands.
Solid Balance Sheet Bodes Well
As of Mar 31, 2023, AptarGroup had available cash and equivalents of approximately $127 million. The company maintains a strong balance sheet, enabling it to continue to invest in a business, pursue strategic opportunities and continue to return value to shareholders in the forms of dividends and repurchases.
The company repurchased shares worth $20 million in the first quarter of 2023. It has $88.5 million available under authorized share repurchases.
In the first quarter of 2023, the company spent $78 million on capital expenditure, the majority of which was in the Pharma segment, including expansions in the United States, France and China. For 2023, the company intends to spend $280-$300 million in capital expenditure.
This reflects the additional accelerated investments that AptarGroup will make to increase production capacity for proprietary pharma dispensing devices to meet rapidly growing demand.
Other Stocks to Consider
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW, and W.W. Grainger, Inc. GWW. WOR and MTW flaunt a Zacks Rank #1 (Strong Buy) at present, and GWW has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved north by 22.6% in the past 60 days. Its shares gained 57.9% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares gained 88.3% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.86, up 1% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 68.4% in the last year.
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