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AptarGroup (ATR) Shares Dip as Q1 Earnings, Revenues Miss

AptarGroup, Inc. ATR reported first-quarter 2016 earnings per share of 71 cents, which improved 3% year over year from 69 cents per share, but fell short of the Zacks Consensus Estimate by a penny. Earnings came within the company’s guidance range of 69–74 cents per share. AptarGroup shares have fallen 5% since the company reported its results on Apr 28 as both the top and bottom lines missed the respective Zacks Consensus Estimate.

On a reported basis, earnings per share decreased 4% to 67 cents from 70 cents in the prior-year quarter. The reported quarter included a cost of 6 cents per share to complete the Mega Airless acquisition and a net loss from Mega Airless of approximately 2 cents per share resulting from the negative impact of certain non-recurring purchase accounting adjustments related to inventory. The first quarter also benefited from unusual tax items which totalled approximately 4 cents per share.

Operational Update

Total revenue dipped 1% year over year to $582 million in the reported quarter, mainly due to negative currency translation effects of 4%. Revenues also missed the Zacks Consensus Estimate of $585 million. Core sales, which exclude currency translation effects as well as the impact of the Mega Airless acquisition, increased approximately 2% year over year in the quarter. However, a negative impact of 2% from decreased custom tooling sales and the passing through of lower resin costs were deterring factors.

Cost of sales declined 3% year over year to $374 million. Selling, research, development and administrative expenses went up 7% year over year to $1036 million. Adjusted operating income increased 4% year over year to $76 million. AptarGroup’s operating margin increased 70 basis points (bps) year over year to 13%.

Segmental Performance

Total revenue in the Beauty + Homes segment plunged 53% year over year to $314 million. However, operating income increased 10% to $25.7 million from $23 million in the year-ago quarter.

Total revenue in the Pharma segment decreased 53% year over year to $183 million. Operating income increased 3% year over year to $54 million in the quarter.

Total revenue in the Food + Beverage segment plummeted 100% year over year to $85 million. Operating income improved 3% year over year to $9.3 million.

Financial Performance

Cash and cash equivalents were $386 million at the end of the quarter compared with $490 million as of Dec 31, 2015. AptarGroup’s long-term debt increased to $773 million as of Mar 31, 2016, from $760 million as of Dec 31, 2015.

Outlook

For the second quarter, AptarGroup expects earnings to be in the range of 87–92 cents. This includes approximately 2 cents per share of positive contribution from the Mega Airless acquisition. On an adjusted basis, this compares with 81 cents per share in the prior-year quarter after excluding approximately 8 cents per share of income recorded in the second quarter of 2015 related to a change in inventory valuation methods and after prior-year earnings per share have been adjusted to reflect comparable foreign currency exchange rates.

AptarGroup expects continued core sales growth from its Pharma and Food + Beverage segments. The Beauty + Home segment, which has struggled to achieve top-line growth last year, is also expected to grow core sales over the prior-year quarter, excluding any positive impact from the Mega Airless acquisition. Meanwhile, the company will continue to focus on cost containment as it invests in growth opportunities.

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.

Zacks Rank

At present, AptarGroup has a Zacks Rank #3 (Hold). Some better-ranked stocks in the packaging sector include Crown Holdings Inc. CCK, Greif, Inc., GEF and Graphic Packaging Holding Co. GPK. All of these stocks carry a Zacks Rank #2 (Buy).

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