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AptarGroup (ATR) Rises 24% YTD: What's Driving the Rally?

Zacks Equity Research

Shares of AptarGroup, Inc. ATR have outperformed the industry year to date, aided by strong results and upbeat guidance for the third quarter. The stock has surged 24.3% so far this year, against the industry’s decline of 22.9%. The momentum is likely to continue on the back of its business-transformation plan to drive the top line, organizational effectiveness, and innovative product launches and acquisitions.

The company has a market cap of $7.5 billion. For the last three months, its average volume of shares traded has been approximately 266.73K. The company has an expected long-term earnings per share growth rate of 10.3%.

AptarGroup has a Zacks Rank #3 (Hold) and a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum. The company's score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 make solid investment choices.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Driving Factors

The company delivered year-over-year improvement in adjusted earnings per share and revenues in the first two quarters of 2019. AptarGroup projects third-quarter 2019 adjusted earnings per share between 91 cents and 97 cents. The mid-point of the guidance reflects year-over-year growth of 1.6% over the adjusted figure of 90 cents to 95 cents in the prior-year quarter. For the third quarter of 2019, the company expects core sales to improve in each segment.

In late 2017, AptarGroup began a business-transformation plan to drive its top line, boost operational excellence, enhance approach to innovation and improve organizational effectiveness. The company is on track with its business transformation, which primarily focuses on the Beauty + Home segment. The company expects this plan to yield incremental EBITDA of approximately $80 million by the end of 2020.

AptarGroup remains committed to business expansion through acquisitions to broaden the scope of technologies, geographic presence and product offerings. In sync with this, the company acquired CSP Technologies, a leader in active packaging technology based on proprietary material science expertise, for an enterprise value of $555 million.

In June, AptarGroup acquired Nanopharm and Gateway Analytical, which is likely to expand its service portfolio that supports pharmaceutical and biotech customers. Previously, the company acquired Reboul and several other companies, including Stelmi and Mega Airless. It also purchased a minority investment in Kali Care, Inc. Last year, it also expanded partnership with Propeller Health and made a strategic equity investment in the company. These initiatives will drive growth.

AptarGroup is also poised to gain from recent innovative product launches. In the Pharma segment, U.S. FDA approved Unidose Powder System, which is intended to treat severe hypoglycemia in people with diabetes. This marks the first FDA approval of a prescription drug using AptarGroup’s patented Unidose Powder System. In the Beauty + Home segment, Monat Studio One introduced a hairspray that features Twist-to-Lock actuator with a patented nozzle that allows for two dispensing settings.

In the Food + Beverage segment, the company has launched StandCap, inverted flexible pouch solution. It enables pouch fitment and dispensing closure using SimpliSqueeze valves technology. Moreover, AptarGroup was selected by Nestlé to develop a dispensing closure for the first creamer launch under its Starbucks partnership.

Positive Growth Projections

The Zacks Consensus Estimate for AptarGroup’s 2019 earnings is currently pegged at $4.19, suggesting growth of 4.66% from the year-ago quarter. The same for 2020 stands at $4.71, indicating an improvement of 12.6% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are Albany International Corporation AIN, AGCO Corporation AGCO and UFP Technologies, Inc. UFPT. While Albany International sports a Zacks Rank #1, AGCO Corp and UFP Technologies carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albany International has an estimated earnings growth rate of 33.85% for 2019. The company’s shares have gained 39.5% so far this year.

AGCO Corp has a projected earnings growth rate of 31.11% for the current year. The stock has gained 37% so far this year.

UFP Technologies has an expected earnings growth rate of 8.10% for the ongoing year. The stock has appreciated 39% year to date.

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