AptarGroup (ATR) Beats On Q3 Earnings & Revenues, Issues View

AptarGroup, Inc. (NYSE:ATR) delivered third-quarter 2018 earnings per share of 99 cents, beating the Zacks Consensus Estimate of 93 cents. Also, earnings grew 21% year over year and came in above management’s guided range of 90-95 cents per share.

On a reported basis, the company recorded earnings of 60 cents per share compared to 83 cents witnessed in the year-ago quarter.

Operational Update

Total revenues improved 7% year over year to $666 million in the reported quarter, driven by 7% core sales growth and a 3% favorable impact from exchange rates. Core sales grew across each business segment, and in each end market and geographic region. Revenues also beat the Zacks Consensus Estimate of $664 million.

Adjusted cost of sales rose 6.8% to $435 million from $408 million recorded in the year-ago quarter. Gross profit increased 6% year over year to $230 million, while gross margin contracted 10 basis points (bps) to 34.6%. Adjusted selling, research, development and administrative expenses flared up 8% year over year to $103.6 million. Adjusted operating income went up 5% year over year to $127 million. AptarGroup’s operating margin shrunk 40 bps year over year to 19%.

Segmental Performance

Total revenues in the Beauty + Homes segment were up 2% year over year to $342 million. Operating income in the reported quarter remained flat year over year at $22 million.

Total revenues in the Pharma segment were up 14% year over year to $228 million. Operating income climbed 30% year over year to $71.8 million in the third quarter.

Total revenues in the Food + Beverage segment rose 6% year over year to $96.5 million. Operating income declined 26% year over year to $8.6 million.

Financial Performance

AptarGroup reported cash and cash equivalents of $291 million as of Sep 30, 2018, down from $712 million as of Dec 31, 2017. At the quarter end, long-term debt was approximately $1,132 million, down from $1,191 million as of Dec 31, 2017.

Acquisition of CSP Technologies

AptarGroup has made a binding offer to acquire CSP Technologies, a leader in active packaging technology based on proprietary material science expertise, for an enterprise value of $555 million. The buyout will help AptarGroup boost its existing business in the Pharma and Food Safety markets.

The integration is underway and proceeding well. The proposed transaction is subject to customary closing conditions and expected to close in fourth-quarter 2018.

Outlook

AptarGroup projects earnings per share for fourth-quarter 2018 will be 81-86 cents, excluding any restructuring expenses and effects associated with the CSP Technologies acquisition. The guidance reflects 18% year-over-year growth at the mid-point.

AptarGroup expects that its core sales will grow in each segment in the current quarter. The company remains committed to execute its growth strategy in order to create long-term value for all stakeholders. AptarGroup expects the inflationary environment to continue, and raw material and transportation costs to impact margins.

Share Price Performance

Shares of the company have outperformed the industry, over the past year. The stock has gained around 19%, while the industry recorded a loss of around 10% during the same time period.

Zacks Rank & Other Stocks to Consider

AptarGroup currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same sector include Enersys (NYSE:ENS) , Encore Wire Corporation (NASDAQ:WIRE) and Donaldson Company, Inc. (NYSE:DCI) . While Enersys and Encore Wire sport a Zacks Rank #1 (Strong Buy), Donaldson Company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enersys has a long-term earnings growth rate of 10%. Its shares have rallied around 21%, over the past year.

Encore Wire has a long-term earnings growth rate of 10%. The company’s shares have gained around 10% in the past year.

Donaldson Company has a long-term earnings growth rate of 11.5%. The company’s shares have appreciated around 12% in a year’s time.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>