On Jan 19, 2015, we issued an updated research report on AptarGroup, Inc. (ATR). The global provider of consumer product dispensing systems is poised to benefit from innovative solutions, cost saving measures, acquisitions and further share repurchases. However, challenging markets in Latin America and Europe, decline in consumer spending and strong competition will hurt growth.
AptarGroup remains committed to its strategic plans which include investment in equipment and acquisitions, to drive growth and profitability. In Dec 2013, AptarGroup acquired a 20% stake in Bapco Closures. In addition, AptarGroup secured an exclusive global license for Bapco’s innovative closure sealing technology that provides package integrity and tamper evidence. The company is looking forward to buy businesses with good technology that will help in its growth going forward.
Notably, AptarGroup launched two new technologies in the beauty market during the third quarter of 2014. The company also participated in the personal care market through several new sun care and spray deodorant introductions in Europe and Latin America. In the home care market, Gillette restaged their Ajax multipurpose cleaning gel in Europe with AptarGroup’s SimpliSqueeze dispensing closure technology.
In the Pharma business too, the company participated in several new customer product introductions, including a generic equivalent to ADVAIR. The company also introduced several new products in the food market in Europe and the U.S.
Further, AptarGroup had inititaited a plan to optimize capacity in Europe in Nov 2012, which was largely completed by 2013-end. Savings from the restructuring are expected to be approxmiately $10 million on an annualized basis. Right sizing the company’s footprint should augment returns over the long term and also help in boosting growth in Europe.
In addition, AptarGroup bought back 0.6 million shares during the third quarter. Approximately $2.6 million shares remain to be repurchased under the authorization. On Dec 17, 2014, the company entered into an agreement to repurchase about $250 million shares under an accelerated share repurchase program (the ASR program) which is part of a $350 million repurchase program authorized on Oct 30, 2014. Share repurchases are an important factor of AptarGroup’s capital allocation strategy and further repurchases will be accretive to earnings.
Despite these positives, AptarGroup anticipates that the fourth quarter will be a challenging one. Consistent with the recent macroeconomic indicators, certain markets in Latin America and Europe are expected to be weaker compared with the 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.
AptarGroup can also face negative demand outlook for its products in the near to medium term due to extended decline in consumer spending. The company could also experience deterioration in operating margins and price competition which could adversely affect its operations and financial condition.
Furthermore, the estimates for AptarGroup moved downward over the past 90 days. The Zacks Consensus Estimate for 2014 decreased 3.4% to $2.85 per share and for 2015 the same reduced 5.2% to $3.08.
AptarGroup carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other stocks that warrant a look in the same industry include Bemis Company, Inc. (BMS), Sealed Air Corp. (SEE) and UFP Technologies, Inc. (UFPT). While Bemis and Sealed Air carry a Zacks Rank #1 (Strong Buy), UFP Technologies holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment