Why Is AptarGroup (ATR) Up 4% Since Last Earnings Report?

It has been about a month since the last earnings report for AptarGroup (ATR). Shares have added about 4% in that time frame, underperforming 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 catalysts.

AptarGroup's Earnings & Sales Top Estimates in Q1

AptarGroup delivered first-quarter 2020 adjusted earnings per share of 93 cents, surpassing the Zacks Consensus Estimate of 88 cents. However, the bottom line declined 11% year over year.

On a reported basis, earnings came in at 84 cents per share compared with the year-ago quarter’s 96 cents.

Total revenues declined 3% year over year to $722 million in the first quarter due to changes in currency exchange rates, passing on lower resin costs and impact of the coronavirus outbreak. The top line beat the Zacks Consensus Estimate of $716 million. Core sales, excluding currency and acquisition effects, dipped 2%. Core sales growth witnessed in the Pharma segment on strong growth in the injectables and active packaging businesses. This was offset by decreases in core sales in other segments due to unfavorable impacts of the coronavirus pandemic.

Operational Update

Cost of sales was down 3.8% to $451 million from the $469 million reported in the year-ago quarter. Gross profit edged down 1.5% year over year to $271 million. Gross margin came in at 37.5% during the first quarter, down from the prior-year quarter’s 37%.

Selling, research, development and administrative expenses flared up 4% year over year to $126 million. Adjusted operating income went down 12% year over year to $94 million. Operating margin came in at 13% in the quarter, down from the year-ago-ago quarter’s 14%. Adjusted EBITDA declined 6.5% year over year to $144 million in the first quarter.

Segmental Performance

Total revenues in the Beauty + Homes segment declined 11.6% year over year to $325 million. Adjusted operating income in the first quarter plummeted 56% year over year to $14 million.

Total revenues in the Pharma segment rose 8.8% year over year to $297 million. Adjusted operating income increased to $91 million in the March-end quarter from the prior-year quarter’s $82 million.

Total revenues in the Food + Beverage segment were down 4% year over year to $99.8 million. Operating income slid 25% year over year to $6 million.

Financial Performance

AptarGroup reported cash and cash equivalents of $410.8 million as of Mar 31, 2020, up from $242 million as of Dec 31, 2019. The company generated $85 million of cash flow from operations in the reported quarter compared with the prior-year quarter’s $78 million. As of Mar 31, 2019, long-term debt was approximately $1,076 million, down from $1,085 million as of Dec 31, 2019.

Outlook

The company expects second-quarter performance to be impacted by near-term uncertainties related to the coronavirus pandemic. The Beauty + Home segment is expected to be significantly affected by continued softness across its end markets. In addition, the Food + Beverage segment might see continued softness in the on-the-go beverage market, primarily related to COVID-19 and the impact from passing on lower resin costs. Considering these factors, the company anticipates second-quarter adjusted earnings per sharein the range of 58 cents to 73 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -31.79% due to these changes.

VGM Scores

At this time, AptarGroup has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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. It's no surprise AptarGroup has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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