2Q Earnings Beat for AptarGroup - Analyst Blog

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AptarGroup, Inc . ( ATR ) reported record second-quarter 2013 adjusted earnings of 77 cents per share (excluding the cost associated with the Stelmi acquisition), up 17% from 66 cents in the year-ago quarter. The results were ahead of the Zacks Consensus Estimate of 74 cents.

Earnings were on the upper end of management's guidance range of 73 cents to 78 cents. The reported earnings exclude restructuring charges of 4 cents per share related to the European Operations Optimization plan compared to 5 cents per share related to costs associated with the Stelmi acquisition. Including this, earnings increased 19.6% to 73 cents per share from the prior-year quarter's earnings of 61 cents.

Operational Update

Total revenue increased 11% year over year to $641 million and surpassed the Zacks Consensus Estimate of $625 million. Core sales increased 4% excluding currency effects and acquisition. Changes in currency exchange rates had no significant impact on sales in the quarter. Aptar Stelmi contributed approximately $39 million to sales.

Cost of sales went up 10.5% year over year to $431 million in the reported quarter. Gross profit increased 12% to $210 million from $187 million in the year-ago quarter. Consequently, gross margin expanded 30 basis points (bps) to 32.7%.

Selling, research & development and administrative expenses remained flat year over year at $88 million. Operating income increased 24.7% to $83.3 million with operating margin expanding 140 basis points (bps) to 13%.

Segment Performance

Total revenue in the Beauty + Homes segment increased 1.5% year over year to $375 million in the quarter. Operating income declined 9.5% to $30 million. Segment sales were driven by increased sales in the beauty and personal care markets in Europe and the personal care market in Latin America. However this was offset by weak U.S markets and beauty markets in Latin America and Asia. Segment operating margin decreased 100 basis points to 8%.

Total revenue in the Pharma segment increased 37.5% year over year to $182.9 million. Both legacy business and Aptar Stelmi performed well in the quarter. Sales to prescription and consumer health care markets improved from the prior-year quarter. Operating income increased 62% year over year to $50 million. Operating margin expanded 400 bps year over year to 27.5%.

Total revenue in the Food + Beverage segment jumped 11% year over year to $83 million. Operating income increased 53% to $11.8 million, mainly on increased sales in the Lincolnton facility. Operating margin also expanded 400 basis points to 14%.

Financial Performance

As of Jun 30, 2013, cash and cash equivalents amounted to $189.9 million versus $229.7 million as of Dec 31, 2012. Total debt amounted to $387.9 million as of Jun 30, 2013, compared with $427.5 million as of Dec 31, 2012. The debt-to-capitalization ratio contracted 210 bps to 21.5% as of Mar 31, 2013 from 23.6% as of Dec 31, 2012.

Optimization Plan of European Operations

In the reported quarter, AptarGroup incurred around $3.1 million in expenses on its European optimization plan. Using current exchange rates, the company expects about $6 million additional costs, most of which will be incurred in 2013. Annual savings of roughly $12 million are expected from the plan.

Outlook

AptarGroup expects earnings in the range of 68 cents to 73 cents per share for the third quarter of 2013. The guidance does not include any impact from the European Operations Optimization plan. The company remains optimistic about the long-term growth based on the investments in Aptar Stelmi and a strong balance sheet position. Expansion in certain regions like Latin America will also contribute to the future earnings and sales.

AptarGroup remains committed to cost containment and development of innovative products. The company also expects income from the Beauty + Home segment to improve. The company is also optimistic about its Pharma business as a boost in capacity should lead to growth in profitability.

Crsytal Lake, Illinois-based AptarGroup is a leading global supplier of a broad range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, and household and food/beverage markets. AptarGroup currently retains a Zacks Rank #3 (Hold).

Other companies in the packaging and containers industry with favorable Zacks Ranks are Packaging Corporation of America ( PKG ) and Sonoco Products Co. ( SON ). Both companies hold a Zacks Rank #2 (Buy).

Among Aptar's peers Bemis Company, Inc. ( BMS ) reported second-quarter 2013 adjusted earnings of 61 cents per share, up 13% from 54 cents earned in the year-ago quarter. The results beat the Zacks Consensus Estimate by a penny and were within management's 57 cents to 63 cents per share guidance range.



APTARGROUP INC (ATR): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

PACKAGING CORP (PKG): Free Stock Analysis Report

SONOCO PRODUCTS (SON): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ATR , BMS , PKG , SON

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