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Is AptarGroup Worth Buying Near All-Time Highs?

Steve Symington, The Motley Fool

AptarGroup (NYSE: ATR) has quietly rallied to fresh all-time highs on the heels of its first-quarter 2019 release late last month. In keeping with its past several quarterly updates, the dispensing-systems specialist has not only demonstrated solid growth from both its core business and strategic acquisitions but also raised its dividend for the 26th straight year.

But is AptarGroup stock worth buying at these levels? Let's dig deeper to see exactly how the company started the new year and what we can expect looking ahead.

Various plastic containers from AptarGroup with products including soap, honey, mayonnaise, and eye drops.

IMAGE SOURCE: APTARGROUP.

AptarGroup results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Growth

Net sales

$744.5 million

$703.4 million

5.8%

GAAP net income

$63.0 million

$59.3 million

6.2%

GAAP earnings per diluted share

$0.96

$0.92

4.3%

DATA SOURCE: APTAR GROUP, GAAP = GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 

What happened with AptarGroup this quarter?

  • Excluding foreign currency exchange and acquisitions, core sales climbed 7%.
  • On an adjusted (non-GAAP) basis, which excludes items like restructuring costs, net income per share climbed 16% to $1.07.
  • Adjusted EBITDA 15% to $154.5 million.
  • By business segment:
    • Beauty and home core sales declined 3% as reported, consisting of a 1% contribution from acquisitions, a 3% increase in core sales, and a 7% currency headwind.
    • Pharma sales grew 19%, including 15% core sales growth, 13% from acquisitions, and a 9% currency headwind.
    • Food and beverage segment sales grew 6%, including 7% core sales growth, 6% from acquisitions, and a 7% currency headwind.
  • AptarGroup's board authorized a stock repurchase plan of up to $350 million and raised its quarterly dividend by 6% to $0.36 per share.

What management had to say

AptarGroup CEO Stphen Tanda stated:

We continued to see positive sales momentum. Our Pharma segment had an exceptionally strong quarter with broad-based demand across our portfolio of innovative drug delivery devices. Our other two segments also grew core sales over the prior year and this was in spite of a decrease in custom tooling sales in our Food + Beverage segment. Profit margins also improved over the prior year due to the mix of business, benefits from our business transformation and positive effects of a decline in resin cost.

Looking forward, and the bottom line

For the second quarter of 2019, AptarGroup anticipates continued core sales growth across "most of [its] markets," with the caveat that strong custom tooling sales during last year's second quarter within the beauty and home segment are unlikely to repeat. As such, AptarGroup sees second-quarter adjusted earnings per share ranging from $1.09 to $1.15, representing roughly 7% constant-currency growth at the midpoint.

Here again, these results might not drop the jaws of many particularly growth-hungry investors. But after considering AptarGroup's consistent industry leadership, its generous capital-returns policies, and its steady top- and bottom-line gains, there was nothing not love about this report from a patient, long-term shareholders' perspective. And I see no reason investors shouldn't be comfortable continuing to hold or even adding to their positions, even with the stock trading near all-time highs.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.