AptarGroup Inc. (ATR 0.70%) announced another stronger-than-expected quarter late last week, punctuated by solid core sales growth and a hefty new acquisition.
With shares up around 7% as a result, let's open the lid to get a better idea of what the dispensing systems specialist had to say, as well as what shareholders should expect in the coming months.
IMAGE SOURCE: APTARGROUP.
AptarGroup results: The raw numbers
| Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Growth |
|---|---|---|---|
|
Net sales |
$710.6 million |
$617.7 million |
15% |
|
GAAP net income |
$55.8 million |
$65.2 million |
(14.4%) |
|
GAAP earnings per diluted share |
$0.86 |
$1.01 |
(14.9%) |
DATA SOURCE: APTAR GROUP, GAAP = GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
What happened with AptarGroup this quarter?
- Core sales (excluding the impact of currencies and acquisitions) grew 11%.
- On an adjusted (non-GAAP) basis -- which excludes restructuring and acquisition expenses -- earnings increased 4% to $1.09 per share, above guidance provided in April for a per-share range of $0.99 to $1.04.
- By segment:
- Beauty and home sales grew 14% as reported, including 10% core sales growth, 1% from acquisitions, and a 3% tailwind from currencies.
- Pharma sales increased 20% as reported, including 14% core sales growth and a 6% contribution from currencies.
- Food and beverage sales rose 7% as reported, including 5% core sales growth and a 2% contribution from currencies.
- Adjusted EBITDA increased 14% to $141 million.
- The company announced a binding offer to acquire active packaging technology leader CSP Technologies for an enterprise value of $555 million, or roughly 13 times CSP's trailing-12-month adjusted EBITDA. Aptar plans to fund the deal with cash on hand and -- assuming it passes regulatory muster -- expects it to close in the fourth quarter of 2018.
What management had to say
AptarGroup CEO Stephen Tanda stated:
We had another strong quarter with core sales growth in each segment, across each end market and in each geographic region. Our Beauty [and] Home segment benefited from healthy demand for our dispensing solutions across each market, aided in part by robust travel retail sales in the Beauty market and increased demand and higher custom tooling sales in the Personal Care market. Our Pharma segment delivered excellent growth with our industry leading drug delivery systems. The growth in the Consumer Health Care and Prescription markets was driven by decongestant and allergy related products. Our Food [and] Beverage segment also grew across each market due to increased demand for our innovative dispensing closures and higher custom tooling sales.
Tanda also elaborated on the CSP acquisition:
This strategic transaction meets our disciplined criteria for acquiring companies with strong positions in attractive markets, proprietary technologies, solid margins and robust growth fundamentals. Similar to Aptar, CSP Technologies has an innovative culture with intellectual property that drives product development and enables highly engineered solutions, including their three-phase polymer technology.
Looking forward
For the third quarter of 2018, AptarGroup anticipates continued year-over-year core sales growth from each segment. On the bottom line, that growth should translate to adjusted earnings per share in the range of $0.90 to $0.95, up from $0.82 per share (adjusted for currencies) in the same year-ago period.
In the end, between AptarGroup's sustained core sales increases, its continued pursuit of acquisitive growth, and its solid forward earnings guidance, there was little for investors not to like in its latest quarterly report. And it should be no surprise that the stock surged to a fresh all-time high in response.
