AptarGroup Inc. (ATR 3.29%) announced second-quarter 2017 results on Thursday after the market closed, highlighting solid performances from its pharma and food-and-beverage segments, but also a disappointing showing from the beauty-and-home business and an underwhelming outlook. Shares of the consumer-packing company fell more than 6% Friday as the market absorbed the news.
Let's have a closer look, then, at AptarGroup's performance over the past few months, as well as what investors can expect down the road.
IMAGE SOURCE: AptarGroup
AptarGroup results: The raw numbers
| Metric |
Q2 2017 |
Q2 2016 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$617.7 million |
$620.0 million |
(3.6%) |
|
GAAP net income |
$65.2 million |
$59.1 million |
10.4% |
|
GAAP earnings per diluted share |
$1.01 |
$0.91 |
11% |
Data source: AptarGroup.
What happened with AptarGroup this quarter?
- On a constant-currency/non-GAAP basis, core sales rose 1%, and net income climbed 12.2%.
- This quarter's per-share earnings also included tax benefits of $0.09 per share related to stock-based compensation, and $0.05 per share related to planned cash repatriation activities.
- By comparison, AptarGroup's guidance (provided last quarter) called for lower earnings per share of $0.92 to $0.97.
- Revenue by segment included:
- A 5% decline in beauty-and-home sales, including a 4% decline in core sales growth and a 1% negative impact from foreign exchange.
- 6% growth in pharma sales, including an 8% increase in core sales growth and a 2% decline from foreign exchange.
- 6% growth in food-and-beverage sales, including a 7% increase in core sales and a 1% negative impact from foreign exchange.
What management had to say
AptarGroup CEO Stephen Tanda stated:
It's been a mixed first half for our Beauty + Home segment, with positive growth in the first quarter being more than offset by a difficult second quarter. Our Pharma segment has grown consistently, and our Food + Beverage segment has performed well despite the continued difficult comparisons to the prior year for our beverage business in Asia. [...] Though we face certain near-term challenges, we remain positive about our long-term growth opportunities across each business segment. We are dedicated to executing our growth strategy, investing for the future, and helping our customers to grow their businesses with our innovative dispensing solutions.
Looking forward
To be fair, three months ago AptarGroup management did warn that the beauty-and-home segment faced uncertainties surrounding economic growth rates in the U.S. and Brazil. And the company expects the segment to continue to endure weakness in both countries in the third quarter, with added risk in China this time resulting from "excessive heat wave energy restrictions."
Meanwhile, Tanda elaborated that the pipeline for pharma "remains solid" but that it may have trouble finding year-over-year sales growth given difficult comparisons with large custom tooling sales that occurred in last year's third quarter. Finally, on a more encouraging note, the food-and-beverage segment should continue to grow as AptarGroup leverages its offerings across new categories.
As a result, Aptar sees third-quarter 2017 earnings per share arriving in the range of $0.77 to $0.82, compared with reported and currency-adjusted earnings of $0.82 and $0.83 per share, respectively, in last year's third quarter. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates predicted higher third-quarter earnings of $0.92 per share.
In the end, this was a decent quarter for AptarGroup, even slightly outpacing the conservative expectations management outlined in April -- and even as the beauty-and-home segment struggled as management suggested it would. There's always a chance, of course, that AptarGroup is once again under-promising with its current earnings guidance. But with that guidance lagging the profitability many investors had already built into their models, it was no surprise to see shares pulling back from near 52-week highs on Friday.
