AptarGroup, Inc. (ATR) reported record results for third-quarter 2014. Adjusted earnings rose 6% year over year to 74 cents per share led by strong performance of Food + Beverage and Pharma segments. Earnings per share came within the company's guidance range of 72 to 77 cents and ahead of the Zacks Consensus Estimate by a penny.
Notably, the prior-year quarter figure excluded restructuring charges of 3 cents per share, while the reported quarter excluded a negative impact of 1 cent related to tax provision item. Including these, earnings came in at 73 cents per share compared with 67 cents in the prior-year quarter.
Shares of AptarGroup gained around 0.86% and closed at $62.24 on Oct 31, a day after the company reported its third-quarter results.
Operational Update
Total revenue rose 5% year over year to $652 million, driven by increased sales in each business segment and each geographic region. Core sales also increased 6%, excluding currency effects. Changes in currency exchange rates accounted for 1% of sales growth. Revenues marginally came ahead of the Zacks Consensus Estimate of $651 million.
Cost of sales went up 4.6% year over year to $443.5 million. Gross profit improved 4.4% to $208 million from $199.6 million in the year-ago quarter. However, gross margin remained flat year over year at 32%.
Selling, research, development and administrative expenses rose 5.4% year over year to $91.6 million. Adjusted operating income increased 4.1% year over year to $78.6 million, while operating margin remained flat year over year at 12.1%.
Segmental Performance
Total revenue in the Beauty + Homes segment increased 1% year over year to $378.9 million. Operating income declined 18% to $25.4 million from $30.9 million in the year-earlier quarter due to start-up costs and weaker economic condition in the U.S. Consequently, the segment's operating margin decreased 150 bps to 6.7%.
Total revenue in the Pharma segment rose 4% year over year to $179.2 million driven by increased demand from prescription drug in the consumer health care markets. Operating income increased 10% to $49.3 million from the year-ago quarter. Operating margin expanded 150 bps year over year to 27.5%.
Total revenue in the Food + Beverage segment surged 25% year over year to $93.8 million. Operating income grew 52% to $11.7 million from $7.7 million the prior-year quarter. Operating margin rose 230 bps year over year to 12.5%.
Financial Performance
AptarGroup ended the third quarter with cash and cash equivalents of $347.4 million, up from $309.9 million as of 2013-end. The long-term debt of the company was at $355.6 million as of Sep 30, 2014, up from $354.8 million as of 2013-end. Debt-to-capital ratio was 30% as of Sep 30, 2014, compared with 25% as of Dec 31, 2013.
AptarGroup approved a new share repurchase authorization of up to $350 million during the quarter. The company also declared a quarterly cash dividend of 28 cents per share. The dividend will be paid on Nov 26, 2014, to shareholders of record as of Nov 5, 2014.
Outlook
AptarGroup expects earnings in the range of 58 to 63 cents per share for the fourth quarter of 2014.
The company expects to benefit from investment in innovative solutions and implementation of cost saving measures. AptarGroup will continue to identify new opportunities for innovative dispensing technologies across each of its segments.
AptarGroup launched two new technologies in the beauty market during the quarter. The company introduced several new products in the drug market in Europe and for the consumer health care market in the U.S.
However, AptarGroup anticipates that the fourth quarter will be challenging. Consistent with the recent macroeconomic indicators, certain markets in Latin America and Europe are expected to be weaker than in recent quarters. Further, the company will face tough comparisons from a strong fourth quarter in the prior year, in which it posted double-digit top-line growth.
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.
At present, AptarGroup has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industrial products sector include MeadWestvaco Corp. (MWV), Advanced Emissions Solutions, Inc. (ADES), AO Smith Corp. (AOS). While MeadWestvaco holds a Zacks Rank #1 (Strong Buy), Advanced Emissions and AO Smith carry a Zacks Rank #2 (Buy).
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