AptarGroup Looks Good on Product Strength, Risks Remain

On Jan 4, 2016, we issued an updated research report on AptarGroup, Inc. ATR. The company will benefit from broad product diversification, expansive geographic reach and product introductions. However, lower inventory levels, currency volatility and soft volumes in the Beauty + Home segment will remain as headwinds.

AptarGroup's third quarter 2015 earnings improved 30% year over year and topped the Zacks Consensus Estimate. The company expects adjusted earnings to lie in the range of 61 cents to 66 cents per share in the fourth quarter of 2015. Earnings are expected to benefit from continued organic sales growth, additional productivity and cost savings, and a relatively benign commodity cost environment.  

Notably, AptarGroup will benefit from product diversification, expansive geographic reach and new products in the pipeline. The company has launched a product called New Skin with an electronic dispensing system in the Beauty and Home segment. In the beauty market, AptarGroup's pumps were selected for a variety of new fragrances. In the Food and Beverage segment, the SimpliSqueeze valve technology for clean and control dispensing continues to see much success.

AptarGroup remains optimistic about long-term growth based on its persistent emphasis on market-focused strategy and investment in research and development. The company continues to examine potential acquisition opportunities in the Pharma segment. This could serve as a near-term catalyst that would drive both top and bottom line growth.

However, AptarGroup's Beauty + Home segment continues to experience soft volumes overall due to macroeconomic trends in the European region and weak demand in certain product lines. Demand in the fragrance category and the sun care category is particularly soft, in part due to weather patterns and consumers wanting to reduce existing inventory levels.

Further, the company's primary foreign exchange exposure is to the euro.  Apart from the euro, the company is also vulnerable to the Brazilian real, British pound, Swiss franc and other South American and Asian currencies, among others. Hence, strengthening of the U.S. dollar relative to foreign currencies, particularly the euro, will continue to be a significant headwind for AptarGroup in 2015.

Over the past 30 days, the Zacks Consensus Estimate for AptarGroup remained flat at $3.00 per share for 2015, while the same decreased 0.6% to $3.20 per share for 2016.

At present, AptarGroup carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Some better-ranked stocks in the sector are Berry Plastics Group, Inc. BERY, Graphic Packaging Holding Company GPK and Albany International Corp. AIN. All three stocks carry a Zacks Rank #2 (Buy).

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