AptarGroup, Inc. (ATR) reported record results for both fourth-quarter and the year 2014. The company’s fourth-quarter adjusted earnings rose 6.8% year over year to 63 cents per share. Strength in diversified business and its exceptional solutions and services assisted growth. Earnings per share matched the upper end of the company’s guidance of 58 cents to 63 cents, and were ahead of the Zacks Consensus Estimate by a penny.
Notably, the prior-year quarter figure excluded restructuring charges of 5 cents per share, a negative impact of 5 cents related to tax provision item and positive impact of 5 cents due to foreign currency translation. Including these, earnings came in at 54 cents per share in the prior-year quarter. Reported quarter's earnings do not include any adjustments.
Operational Update
Total revenue declined 6% year over year to $599.2 million in the reported quarter, impacted by adverse foreign currency exchange rate and soft demand in certain markets. However, core sales increased 1%, excluding currency effects. Revenues came ahead of the Zacks Consensus Estimate of $565 million.
Cost of sales increased 6.4% year over year to $407.3 million. Gross profit declined 5% to $192 million from $202 million in the year-ago quarter. However, gross margin expanded 30 basis points year over year to 32%.
Selling, research, development and administrative expenses went down 6.6% year over year to $89 million. Adjusted operating income decreased 6.4% year over year to $64.5 million, while operating margin remained flat year over year at 10.8%.
Segmental Performance
Total revenue in the Beauty + Homes segment decreased 8.2% year over year to $342.9 million due to weak demand in the fragrance sector. Operating income slumped 23.7% to $18 million from $23.6 million in the year-earlier quarter. Consequently, the segment’s operating margin decreased 110 bps to 5.2%.
Total revenue in the Pharma segment fell 1.5% year over year to $182 million. Operating income increased 3% to $50 million from the year-ago quarter. Operating margin expanded 120 bps year over year to 27.5%.
Total revenue in the Food + Beverage segment went down 5.9% year over year to $74 million, primarily due to inventory destocking by certain customers. Operating income plunged 36% to $4.5 million from $7.1 million the prior-year quarter. Operating margin contracted 290 bps year over year to 6.1%.
Financial Performance
AptarGroup had cash and cash equivalents of $399.8 million at the end of 2014, up from $309.9 million at 2013-end. The company’s long-term debt increased to $588.9 million as of Dec 31, 2014 from $354.8 million as of Dec 31, 2013.
On Dec 17, 2014, AptarGroup 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. The company also declared a quarterly cash dividend of 28 cents per share. The dividend will be paid on Feb 18, 2015, to shareholders of record as of Jan 28, 2015.
2014 Performance
AptarGroup posted record adjusted earnings of $2.85 per share for 2014, which increased 6.7% from $2.67 a share in 2013. Strong performance of the Pharma segment aided record results. Earnings came in line with the Zacks Consensus Estimate. Including special items, earnings were $2.85 per share for the year, compared with $2.52 in 2013.
Revenues for the full year increased 3% year over year to $2.6 billion in 2014. Revenues came in line with the Zacks Consensus Estimate.
Outlook
For the first quarter of 2015, AptarGroup expects adjusted earnings to be approximately 60 cents per share. The company guided reported earnings in the range of 60 to 65 cents per share for the first quarter.
AptarGroup expects to benefit from improvement in operational efficiencies, investment in innovative solutions and implementation of cost saving measures. However, weak demand and uncertainty in foreign currency exchange rates remain headwinds for the company.
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 #3 (Hold). Some better-ranked stocks in the industrial products sector include Bemis Company, Inc. (BMS), Berry Plastics Group, Inc. (BERY) and Sealed Air Corporation (SEE). While Bemis and Berry Plastics Group carry a Zacks Rank #1 (Strong Buy), Sealed Air hold a Zacks Rank #2 (Buy).
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