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Why Is AptarGroup (ATR) Up 0.2% Since Last Earnings Report?

A month has gone by since the last earnings report for AptarGroup (ATR). Shares have added about 0.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

AptarGroup's Earnings & Sales Beat Estimates in Q2

AptarGroup delivered second-quarter 2020 adjusted earnings per share of 80 cents, which surpassed the Zacks Consensus Estimate of 68 cents. However, the bottom line declined 30% year over year.

On a reported basis, earnings came in at 63 cents per share compared with the year-ago quarter’s $1.12 per share.

Total revenues declined 6% year over year to $699.3 million in the June-end quarter due to negative impacts of the coronavirus pandemic on the beauty and beverage markets, changes in currency exchange rates and passing on lower resin costs. These negatives were offset by contributions from acquisitions. The top line beat the Zacks Consensus Estimate of $655 million. Core sales, excluding currency and acquisition effects, dropped 6% year over year. Sales growth witnessed in the Pharma segment was partly offset by declines in Beauty + Home and Food + Beverage segments.

Operational Update

Cost of sales was down 5.8% year over year to $442 million. Gross profit fell 6% year over year to $257.3 million. Gross margin came in at around 37% during the second quarter, unchanged from the prior-year quarter’s figure.

Selling, research, development and administrative expenses flared up 7.9% year over year to $123 million. Adjusted operating income went down 26.5% year over year to $83 million. Operating margin came in at 11.8% in the quarter, down from the year-ago quarter’s 15.2%. Adjusted EBITDA declined 14.3% year over year to $137 million in the April-June quarter.

Segmental Performance

Total revenues in the Beauty + Homes segment declined 12.4% year over year to $299.8 million. Adjusted operating income in the second quarter plummeted 97.4% year over year to $0.7 million.

Total revenues in the Pharma segment rose 6.7% year over year to $301 million. Adjusted operating income came in at $86 million in the June-end quarter, flat year over year.

Total revenues in the Food + Beverage segment were down 17.6% year over year to $98 million. Operating income slid 30.1% year over year to $8.6 million.

Financial Performance

AptarGroup reported cash and cash equivalents of $247.6 million as of Jun 30, 2020, up from $242 million as of Dec 31, 2019. The company generated $228 million of cash flow from operations in the first half of the current year compared with $221 million in the first half of 2019. As of Jun 30, 2020, long-term debt was approximately $1,083 million, down from $1,085 million as of Dec 31, 2019.

Outlook

The company expects to witness economic uncertainty in some of its markets owing to the recent spike in coronavirus cases in many regions of the world. However, AptarGroup expects gradual improvement in the second half of the year based on the resumption of travel activity, the reopening of retail stores and consumer spending. Considering these factors, the company anticipates third-quarter adjusted earnings per share in the range of 80 cents to 88 cents.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.69% due to these changes.

VGM Scores

Currently, AptarGroup has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 looks promising. Notably, AptarGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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