AptarGroup Shares Fall After Record Q1 Earnings - Analyst Blog

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Shares of AptarGroup, Inc. ( ATR ) fell 0.33% and closed at $67.14 due to the negative impact of the overall market movement, a day after the company reported record results for first-quarter 2014. The company posted record earnings of 71 cents per share, which rose 11% from adjusted earnings of 64 cents in the year-ago quarter and beat the Zacks Consensus Estimate of 67 cents. Earnings per share also came ahead of the company's guidance range of 65 to 70 cents.

Notably, the prior-year quarter figure excluded charges of 5 cents per share related to the European restructuring plan. Including these, prior-year earnings came at 59 cents per share.

Operational Update

Total revenue rose 9% year over year to record $676 million, which also surpassed the Zacks Consensus Estimate of $650 million. Core sales also increased 9%, excluding currency effects. Changes in currency exchange rates have not contributed to the sales growth.

Cost of sales went up 8% year over year to $453 million. Gross profit improved 11.8% to $222.6 million from $199 million in the year-ago quarter. Consequently, gross margin increased 70 basis points (bps) to 32.9%.

Selling, research, development and administrative expenses rose 13% year over year to $106.7 million. Adjusted operating income increased 14.6% year over year to $78.7 million with operating margin expanded 50 bps to 11.6%.

Segmental Performance

Total revenue in the Beauty + Homes segment increased 7.6% year over year to $391 million, driven by increased demand from the beauty and personal care market. Operating income also rose 13.8% to $27.8 million from $24.4 million in the year-earlier quarter due to improved operating efficiencies in the U.S. and savings realized by European restructuring plan. The segment's operating margin increased 40 bps to 7.1%.

Total revenue in the Pharma segment rose 15.1% year over year to $194 million, led by strong demand from the consumer health care and prescription drug market. Operating income increased 14% to $52.5 million from the year-ago quarter on the back of strong sales volume. Operating margin, however, contracted 20 bps year over year to 27%.

Total revenue in the Food + Beverage segment increased 6% year over year to $90.5 million. Operating income rose 6.2% to $9 million from the prior-year quarter. Operating margin remained flat year over year at 10%.

Financial Performance

As of Mar 31, 2014, AptarGroup reported cash and cash equivalents of $317 million versus $309.9 million as of Dec 31, 2013. Long-term debt of the company remained flat at $354.8 billion as of Mar 31, 2014. Debt-to-capitalization ratio expanded 80 bps to 25.8% as of Mar 31, 2014 from 25% as of Dec 31, 2013.

During the quarter, the company bought back 200,000 shares for $13 million. This brings the remaining balance of shares authorized for repurchase to approximately $3.8 million.

In addition, on Apr 11, the company increased its quarterly cash dividend by 12% to 28 cents per share. The dividend will be paid on May 21, 2014 to stockholders of record on Apr 30, 2014.

Outlook

AptarGroup expects earnings in the range of 78 to 83 cents per share for the second quarter of 2014. The guidance does not include any impact from the European Operations Optimization plan. The company anticipates depreciation and amortization for 2014 to be around $160 million. Capital expenditures will be approximately $190 million, including $26 million related to the Stelmi expansion project.

The company remains committed to cost containment and the development of innovative products. It expects demand for innovative dispensing solutions to drive growth. However, the emerging market currency environments are expected to remain challenging in the near term. Moreover, earnings will be negatively impacted by the volatile raw material prices and economic uncertainty.

Crystal Lake, IL-based AptarGroup is a leading global supplier of a wide range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets.

At present, AptarGroup carries a Zacks Rank #3 (Hold). A better-ranked stock in the industrial products sector is Berry Plastics Group, Inc. ( BERY ), which has a Zacks Rank #2 (Buy).

Performance of Peers

Among AptarGroup's competitors, Bemis Company, Inc. ( BMS ) reported first-quarter 2014 adjusted earnings of 58 cents per share, up 9.4% from 53 cents earned in the year-ago quarter. The reported figure also surpassed the Zacks Consensus Estimate by a penny. Earnings per share came within management's guidance range of 55-60 cents.

Sonoco Products Co. ( SON ) posted first-quarter 2014 adjusted earnings of 52 cents per share, which rose 4% from 50 cents earned in the year-ago quarter and beat the Zacks Consensus Estimate by a penny. Earnings were within the company's guided range of 50-54 cents.

A positive price/cost relationship, modest productivity improvement and decreases in pension and interest expenses helped offset lost production and sales, which stemmed from a severe winter across the U.S. and Canada.



APTARGROUP INC (ATR): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

BEMIS (BMS): 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 , BERY , BMS , SON

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