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Why Is AptarGroup (ATR) Up 0.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for AptarGroup (ATR - Free Report) . Shares have added about 0.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AptarGroup due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AptarGroup Beats on Q3 Earnings & Revenues, Issues View

AptarGroup 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.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, AptarGroup has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AptarGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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