AptarGroup Upgraded to Sell - Analyst Blog

On Apr 8, 2013, Zacks Investment Research upgraded AptarGroup, Inc. ATR, the global provider of consumer product dispensing systems,  to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell).

Why the Upgrade  

AptarGroup delivered strong fourth-quarter 2013 results with both the top and bottom lines surpassing the respective Zacks Consensus Estimate. Adjusted earnings of 69 cents per share increased 21% year over year on record revenues of $637 million, which rose 12% year over year.

AptarGroup's Pharma segment continued to perform well, generating higher margins compared with its other segments. The momentum is expected to continue in 2014 given the segment's good growth prospects and high barriers to entry. Furthermore, the acquisition of Stelmi Group in 2012 has broadened its product portfolio and customer reach. The company's $26 million investment in capacity expansion at Stelmi in 2014 will further strengthen the segment's growth profile.

In Dec 2013, AptarGroup acquired a 20% stake in Bapco Closures for approximately $5 million and also secured an exclusive global license for Bapco's sealing technology that provides package integrity and tamper evidence. The technology has scope of use in diverse markets. The acquisition, along with the exclusive global license for Bapco's innovative closure sealing technology, gives AptarGroup a better foothold in the market.

AptarGroup will also benefit from the targeted savings of $10 million to $12 million on an annualized basis from its restructuring plan in Europe which was substantially completed by 2013 end. Rightsizing the footprint should augment returns over the long term and also help boost growth in Europe.

However, effects of the challenging currency environment (particularly in Latin America and Southeast Asia) and modest pricing pressure on the Beauty + Home segment, increase in resin prices and a sluggish U.S. personal care end market remain headwinds.

We expect AptarGroup to perform in line with its peers in the coming months and advice investors to wait for a better entry point before accumulating shares.

Stocks That Warrant a Look

Some better-ranked stocks in the same sector include Packaging Corporation of America PKG, KapStone Paper and Packaging Corporation KS and Neenah Paper, Inc. NP, which carry a Zacks Rank #1 (Strong Buy).