Reasons To Hold AptarGroup (ATR) In Your Portfolio For Now

AptarGroup, Inc. (NYSE:ATR) has delivered upbeat results over the past few quarters, primarily driven by focus on restructuring activities and execution of growth strategies. However, elevated raw material costs and negative impact of foreign currency translation remain headwinds.

The company has been witnessing upward estimate revisions over the past 60 days. The Zacks Consensus Estimate for earnings inched up 0.5% to $3.92 for 2018. Further, AptarGroup outpaced the Zacks Consensus Estimate in the trailing four quarters, average positive earnings surprise being 8.73%.

The company, with a market capitalization of approximately $6.2 billion, currently carries a Zacks Rank #3 (Hold). It has an estimated long-term earnings growth rate of 8.5%.

Below, we briefly discussed the company’s potential growth drivers and possible headwinds.

Factors Favoring AptarGroup

Price Performance

Shares of the company have outperformed the industry, over the past year. The stock has gained around 13%, while the industry recorded a loss of around 18% during the same time period.

Return on Assets

AptarGroup currently has a Return on Assets (ROA) of nearly 8%, while the industry recorded ROA of 6%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Growth Drivers in Place

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

Further, the company is poised to gain from product launches. Its Beauty + Home segment has collaborated with a third party which provides image-recognition technology. The company has created a new sampling package for the PacoRabanne fragrance by Puig. It also recently unveiled PureHale, affordable and ready-to-use upper respiratory delivery system. In its Food + Beverage segment, AptarGroup is marketing a new technology called Flip Lid, a consumer-friendly dispensing closure, designed to promote post-use recycling.

Concerns for AptarGroup

AptarGroup’s results in the last quarter of the year typically are negatively impacted by customer plant shutdowns in December. Furthermore, its performance will be impacted by the seasonality of certain products and changes in product mix. Moreover, difficult comparison remains a matter of concern.

The company will also bear the brunt of changes in foreign currency rates, as well as elevated raw material costs and transportation costs. These are expected to affect near-term margins.

Bottom Line

Investors are likely to retain the stock at present as it has ample prospects for outperforming its peers in the near future.

Stocks to Consider

Some better-ranked stocks in the same sector include CECO Environmental Corp. (NASDAQ:CECE) , W.W. Grainger, Inc. (NYSE:GWW) and Northwest Pipe Company (NASDAQ:NWPX) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

CECO has a long-term earnings growth rate of 15%. The stock has surged around 50% in a year’s time.

Grainger has a long-term earnings growth rate of 12.4%. The company’s shares have been up 24% during the past year.

Northwest Pipe has a long-term earnings growth rate of 10%. Its shares have rallied 29% in the past year.

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