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AptarGroup Beats Q1 Earnings on Cost Control, Shares Up - Analyst Blog

Shares of AptarGroup, Inc.ATR rose as much as 3% and closed at $63.96 on May 4, after the company reported strong first-quarter 2015 earnings. Adjusted earnings improved 17% year over year to 70 cents per share in the quarter driven by outstanding performance of its Pharma segment.

Earnings also benefited from cost containment efforts and lower raw material costs across each business segment. Earnings per share surpassed the company's guidance of 60 cents and also came ahead of the Zacks Consensus Estimate of 62 cents.

Notably, on a reported basis, earnings decreased 1% to 70 cents from 71 cents per share in the prior-year quarter. Reported quarter earnings do not include any adjustments.

Aptargroup Inc. - Earnings Surprise | FindTheCompany

Operational Update

Total revenue declined 13% year over year to $590 million in the reported quarter, impacted by weak foreign currencies, primarily the euro. However, core sales decreased 1%, excluding currency effects. Revenues fell short of the Zacks Consensus Estimate of $608 million.

Cost of sales went down 20.8% year over year to $386 million. Gross profit declined 8.4% to $203.8 million from $222.6 million in the year-ago quarter. However, gross margin expanded 160 basis points year over year to 34.6%.

Selling, research, development and administrative expenses went down 9.8% year over year to $96.2 million. Operating income decreased 6.5% year over year to $73.6 million, while operating margin increased 90 basis points year over year to 12.5%.

Segmental Performance

Total revenue in the Beauty + Homes segment decreased 16% year over year to $329.4 million. Operating income slumped 15.8% to $23.4 million from $27.8 million in the year-earlier quarter. However, the segment's operating margin remained flat at 7.1%.

Total revenue in the Pharma segment fell 8% year over year to $178.7 million. Operating income fell 1% to $52 million from the year-ago quarter. Operating margin expanded 210 bps year over year to 29%. Volume increases, along with the mix of business in the quarter drove the improvement in operating margin.

Total revenue in the Food + Beverage segment went down 10% year over year to $81.7 million, primarily due to inventory destocking by certain customers. Operating income remained flat year over year at $7.1 million. Operating margin increased 110 bps year over year to 6.1%.

Financial Performance

Cash and cash equivalents were $385.7 million at the end of first-quarter 2015 versus $399.8 million at the end of the year-ago quarter. AptarGroup's long-term debt increased to $812 million as of Mar 31, 2015 from $588.9 million as of Dec 31, 2014. Capital expenditures in the quarter were approximately $27 million compared with approximately $43 million in the prior year.

Outlook

For the second quarter of 2015, AptarGroup expects adjusted earnings to be approximately 66 cents per share. The company guided reported earnings in the range of 73 cents to 78 cents per share.

During the quarter, AptarGroup's innovative unit dose delivery system was chosen for a new prescription supplement to treat vitamin deficiency, and gel delivery system was chosen for the first and only gel nasal system for testosterone products approved by the FDA. The company foresees supplements in hormone replacement treatment as opportunities for future growth.

In the injectables market, AptarGroup continue to leverage its commercial strength to grow elastomer component business globally. The company now offers a range of coated stopper that will allow customers a wider variety of compatible choices for sensitive medicine formulations, including biopharmaceutical.

Asia remains a bright spot as demand for the facial skin care market continues to grow. While continued softness in the Beauty and Home segment and sluggish fragrance demand in the U.S. will hurt growth. AptarGroup expects demand in Latin America to be weak. The currency exchange rate environment will remain a headwind.

Our Take

AptarGroup expects to benefit from improvement in operational efficiencies, investment in innovative solutions and implementation of cost saving measures. However, weak demand and uncertainty in foreign currency exchange rates remain headwinds for the company.

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 has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industrial products sector include ACCO Brands Corp. ACCO , AO Smith Corp. AOS and Berry Plastics Group, Inc. BERY . All these stocks carry a Zacks Rank #1 (Strong Buy).

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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 Nasdaq, Inc.


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

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