Investment research report for ATR

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

AptarGroup, Inc. (ATR) is a global provider of a broad range of innovative packaging, dispensing, and material science solutions for the beauty, personal care, home care, pharmaceutical, food, and beverage markets. The company operates through three segments: Aptar Pharma, Aptar Beauty + Home, and Aptar Closures.

Financial Performance and Outlook

  • AptarGroup has demonstrated consistent revenue growth, driven by strong performance across its diversified segments, particularly the higher-margin Pharma segment.
  • The company has been able to expand its adjusted EBITDA margins through operational improvements, cost management initiatives, and leveraging its fixed cost base.
  • AptarGroup generates robust operating cash flows, providing ample liquidity to fund growth investments, acquisitions, and return capital to shareholders.
  • The company maintains a conservative financial position with a low net debt to capital ratio and a track record of consistent dividend increases.

Strategic Initiatives and Competitive Advantages

  • AptarGroup has a disciplined capital allocation strategy, investing in strategic acquisitions that enhance its product portfolio and capabilities, such as digital health solutions and injectable drug delivery.
  • The company is focused on developing sustainable and innovative solutions, aligning with increasing customer and regulatory demands for environmentally-friendly packaging.
  • AptarGroup’s diversified business model, successful acquisition integration, and focus on sustainability position it well for long-term value creation and competitive advantage.

Investment Considerations

  • AptarGroup’s consistent financial performance, disciplined capital allocation, sustainability focus, and successful M&A integration make it an attractive long-term investment opportunity.
  • However, investors should monitor the company’s ability to navigate macroeconomic challenges, inflationary pressures, and the pace of recovery across its end markets.
  • The company’s valuation metrics have varied, and growth expectations are moderate, which could impact future stock performance.

Back to Table of Contents

Valuation Analysis

Price Target Analysis

The following is the price target analysis of company ATR:

PE ratio:
– Low: 22.767296884156735
– Base: 30.018338076248217
– High: 37.2693792683397

PB ratio:
– Low: 3.4948555082328294
– Base: 4.08856936109396
– High: 4.68228321395509

EPS Growth:
– Low: 0.90%
– Med: 3.68%
– High: 5.92%

DPS Growth:
– Low: 3.01%
– Med: 3.38%
– High: 3.73%

Recommendation

Unable to provide price targets since this company’s financials are highly unstable. We recommend not to hold this stock in your portfolio.

Back to Table of Contents

Industry and Competitors Analysis

ATR (AptarGroup, Inc.) and its Competitive Landscape

Based on the information provided, ATR (AptarGroup, Inc.) operates in the medical instruments and supplies industry. Some key points about ATR and its competitive landscape:

ATR provides dispensing, sealing, and material science solutions primarily for the pharmaceutical, beauty, personal care, home care, and food/beverage markets through its Pharma, Beauty+Home, and Food+Beverage segments.

Major competitors in this industry include companies like Haemonetics (HAE), Merit Medical (MMSI), AngioDynamics (ANGO), Envista (NVST), Akoya Biosciences (AKYA), AtriCure (ATRC), Atrion (ATRI), ICU Medical (ICUI), Cooper Companies (COO), Teleflex (TFX), West Pharmaceutical (WST), Alcon (ALC), and ResMed (RMD). These companies offer a range of medical devices, equipment, consumables and services for various healthcare applications like drug delivery, surgical devices, vision care, respiratory care, dental products etc.

In terms of financial metrics like revenue, profit margins, and market capitalization, some of the larger competitors appear to be Alcon, ResMed, Cooper Companies, West Pharmaceutical, Teleflex and ICU Medical. However, ATR seems to have relatively healthy profit margins and is a sizeable player, suggesting a decent competitive positioning in its core markets, especially pharma packaging and dispensing solutions.

So in summary, ATR faces competition from various medical device and life sciences companies, but appears to be a notable player focused on specialized packaging and delivery solutions, particularly in the pharmaceutical industry segment.

Back to Table of Contents

Chart of Competitors

"Chart of Competitors"

Back to Table of Contents

Financial Analysis

Financial Strength

The company has maintained a relatively stable current ratio around 1.2-1.5 over the years, indicating a decent ability to meet short-term obligations. The debt-to-equity ratio has been gradually declining from around 0.9 in 2018 to around 0.5 in recent quarters, suggesting improving financial leverage. The interest coverage ratio has been consistently above 8-10x, demonstrating the company’s ability to comfortably service its debt obligations.

Potential for Growth

Revenue growth has been modest, ranging from -6% to 9% year-over-year in recent quarters, indicating potential for improvement. The company’s three-year revenue growth per share has been positive, around 10-25%, suggesting some growth potential. Analyst estimates project revenue growth of around 5-6% annually over the next few years, indicating moderate growth expectations.

Competitive Advantage

The company operates in the packaging and dispensing solutions industry, which could provide some competitive advantages through product differentiation and customer relationships. The company’s focus on material science solutions and partnerships (e.g., with PureCycle Technologies) could potentially offer competitive advantages in innovation and sustainability.

Quality of Management

The company’s profitability metrics, such as return on equity and return on assets, have been relatively stable, indicating decent management of resources. The consistent dividend payments and share repurchases suggest a shareholder-friendly approach by management.

Shareholder Friendliness

The company has maintained a consistent dividend payout ratio of around 30-50%, indicating a commitment to returning cash to shareholders. The dividend per share has grown at a moderate rate of around 5-15% over the past three years, suggesting a focus on increasing shareholder returns.

Valuation

The price-to-earnings ratio has varied significantly, ranging from around 22x to 42x in recent years, indicating potential volatility in the stock’s valuation. The price-to-book ratio has been relatively stable, around 3.5-4.5x, suggesting a reasonable valuation compared to the company’s book value. Analyst estimates for EPS growth over the next few years are moderate, around 5-8%, which could influence the stock’s valuation going forward.

Overall, AptarGroup appears to have a decent financial position, with moderate growth prospects, potential competitive advantages in its industry, and a shareholder-friendly approach. However, the company’s valuation metrics have varied, and growth expectations are moderate, which could impact future stock performance.

Back to Table of Contents

Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

Back to Table of Contents

Chart of Absolute Metrics

"Chart of Absolute Metrics"

Back to Table of Contents

Earnings Call Multi-Year Analysis

Pharma segment strength and growth potential:

The Pharma segment is a key growth driver, driven by strong demand for proprietary drug delivery systems, injectable components, and active material solutions. Aptar is investing significantly to expand capacity and capabilities in this high-growth, high-margin segment, including in areas like injectables, digital health solutions, and regulatory services. The segment’s long development cycles and pipeline of innovative products position it well for sustained growth.

Diversified portfolio and market resilience:

Aptar’s diverse product offerings across Pharma, Beauty + Home, and Food + Beverage segments provide resilience against downturns in any single market. The company’s shared technologies and expertise enable it to serve multiple end markets and capitalize on growth opportunities.

Focus on operational efficiency and margin expansion:

Aptar is actively working to improve operational efficiency, reduce costs, and optimize its manufacturing footprint to drive margin expansion. Pricing initiatives and cost management are crucial to offset inflationary pressures and supply chain challenges.

Strategic investments and acquisitions:

The company is making strategic investments in capacity expansions, sustainability initiatives, and acquisitions to enhance its capabilities and long-term growth prospects. However, these investments may have a dilutive impact on earnings in the near term.

Sustainability and ESG initiatives:

Aptar is focused on developing sustainable solutions, reducing its environmental footprint, and advancing its ESG initiatives, which are seen as a competitive advantage. Customer adoption and regulatory changes will play a crucial role in the success of these initiatives.

Macroeconomic and industry challenges:

The company faces headwinds from inflation, supply chain disruptions, labor shortages, and uneven demand recovery across regions and end markets. Navigating these challenges effectively, particularly through pricing actions and cost management, will be critical for long-term success.

Overall, AptarGroup’s diversified portfolio, focus on the high-growth Pharma segment, operational efficiency initiatives, and strategic investments position it well for long-term growth. However, investors should closely monitor the company’s ability to manage macroeconomic challenges, inflationary pressures, and the pace of recovery across its end markets.

Back to Table of Contents

Financial Statements Multi Year

Revenue Growth

Aptar has demonstrated consistent revenue growth driven by strong performance across its diversified segments – Pharma, Beauty, and Closures. Core sales growth has been driven by increased volumes, favorable product mix, and pricing actions to offset inflation.

Improving Profitability

The company has been able to expand its adjusted EBITDA margins over time through operational improvements, cost management initiatives, and leveraging its fixed cost base. The higher-margin Pharma segment has been a key contributor to profitability.

Healthy Cash Flows

Aptar generates robust operating cash flows, providing ample liquidity to fund growth investments like capacity expansions, acquisitions, and return capital to shareholders through dividends and share buybacks.

Disciplined Capital Allocation

The company has a track record of investing in growth through strategic acquisitions that enhance its product portfolio and capabilities. It also maintains a conservative financial position with a low net debt to capital ratio.

Focus on Sustainability

Aptar is making progress on its sustainability goals, developing more environmentally-friendly products and reducing emissions, aligning with increasing customer and regulatory demands.

Successful Acquisition Integration

The company has demonstrated its ability to successfully integrate acquisitions, extracting synergies and expanding into new growth areas like digital health solutions and injectable drug delivery.

Overall, Aptar’s diversified business model, consistent financial performance, disciplined capital allocation, sustainability focus, and successful M&A integration position it well for long-term value creation, making it an attractive investment opportunity.

Back to Table of Contents

Insider Trading Analysis

Long-term Patterns

The CEO (Tanda Stephan B.) and CFO (Kuhn Robert) have been consistently awarded large amounts of stock and stock options over the years, indicating they are heavily incentivized through equity compensation. Several other top executives like the President (Touya Gael), Chief Commercial Officer (Prieur Marc), and Chief Scientific Officer (Gong Xiangwei) have also received significant equity awards. There have been multiple instances of large stock sales by the CEO, CFO, and other executives, suggesting they are periodically liquidating portions of their equity holdings.

Recent Patterns

In the past year, the CEO (Tanda Stephan B.) has sold over 31,000 shares, while the CFO (Kuhn Robert) has sold over 50,000 shares. Other executives like the President (Touya Gael) and Chief Commercial Officer (Prieur Marc) have also made substantial stock sales. However, the CEO, CFO, and other top executives continue to hold a significant number of shares, ranging from tens of thousands to over 100,000 shares each.

Implications

The consistent equity awards to the CEO, CFO, and other top executives suggest the company places a strong emphasis on aligning their interests with shareholders through long-term incentives. The periodic large stock sales by these insiders could be interpreted as them taking some “chips off the table”, but they still maintain substantial ownership stakes, indicating their continued confidence in the company’s long-term prospects. For long-term investors, the insider trading patterns suggest the leadership team is heavily invested in the company’s success. However, the recent stock sales may raise some short-term concerns about their near-term outlook.

Overall, the insider trading data paints a picture of a company that heavily incentivizes its top executives through equity compensation, while those executives also periodically monetize portions of their holdings, likely for personal financial reasons. Long-term investors may view this as a positive sign of alignment, while short-term investors may be more cautious about the recent stock sales.

Back to Table of Contents

Management Compensation Benchmark Analysis

Executive Compensation Overview

Based on the executive compensation details provided, it appears that the executives at AptarGroup, Inc. (ATR) are compensated in a way that does not fully align with creating long-term shareholder value:

  1. The base salary portion of total compensation is relatively low, averaging around 32.13% across all reported executives and years. This suggests a higher emphasis on variable compensation like stock awards and incentive plans.

  2. Comparing to the other companies provided:

  3. Haemonetics Corporation (HAE) has a higher average base salary portion of 32.52%.
  4. Merit Medical Systems, Inc. (MMSI) has a significantly higher average base salary portion of 60.32%.
  5. AngioDynamics, Inc. (ANGO) has a lower average base salary portion of 39.57%.
  6. Envista Holdings Corporation (NVST) has a lower average base salary portion of 23.73%.
  7. Akoya Biosciences, Inc. (AKYA) has a higher average base salary portion of 31.49%.

Potential Concerns

  1. The high proportion of stock awards and incentive plan compensation for ATR executives may incentivize short-term stock price performance over long-term value creation. This could potentially lead to decisions that prioritize quarterly results over sustainable growth.

  2. The lack of bonuses for most ATR executives in recent years is also noteworthy, as bonuses can be an important tool to align executive compensation with company performance.

Conclusion

In summary, the executive compensation structure at ATR appears to be more heavily weighted towards variable, equity-based compensation compared to the benchmark companies provided. This may not fully incentivize the executives to focus on long-term shareholder value creation, which could be an area of concern for long-term investors.

Back to Table of Contents

Proxy Statement Analysis

Executive Compensation Structure

The proxy statement outlines the different components of executive compensation, including base salary, annual incentive (bonus), and long-term incentive (equity-based awards). It is important to understand how these components are structured and weighted to incentivize executives to focus on long-term value creation.

Performance Metrics

The annual incentive plan and long-term incentive plan likely have specific performance metrics that determine the payouts to executives. Key metrics to look for include measures of financial performance (e.g., revenue growth, profitability, return on capital), operational efficiency, and strategic objectives aligned with long-term value creation.

Equity-Based Awards

The use of equity-based compensation, such as stock options, restricted stock units, or performance shares, can help align executives’ interests with those of shareholders. It is important to review the vesting schedules and performance conditions (if any) associated with these equity awards to ensure they incentivize long-term thinking and value creation.

Stock Ownership Guidelines

The proxy statement may disclose any stock ownership guidelines or requirements for executives, which can further strengthen the alignment between executives and shareholders.

Clawback Policies

The presence of clawback policies that allow the company to recoup incentive compensation in the event of financial restatements or other misconduct can discourage short-term risk-taking and promote accountability.

By reviewing these key elements of the executive compensation program, a long-term investor can assess whether the incentive structure is designed to motivate executives to make decisions and take actions that will drive sustainable, long-term value growth for the company and its shareholders.

Back to Table of Contents

News Analysis

Strong financial performance

AptarGroup has consistently reported record revenues, earnings, and cash flows over the years, indicating a healthy and growing business.

Strategic acquisitions

The company has made several acquisitions to expand its product portfolio, geographic reach, and capabilities, especially in the pharmaceutical and beauty packaging segments. Recent acquisitions include FusionPKG, Noble International, CSP Technologies, and Nanopharm.

Focus on innovation

AptarGroup invests in R&D and has launched innovative products like the Activ-Film technology, nasal unidose devices, digital health platforms, and sustainable packaging solutions, positioning it well for future growth.

Sustainability initiatives

The company has set science-based emissions reduction targets, joined the Ellen MacArthur Foundation’s Circular Economy network, and launched recyclable packaging solutions, appealing to environmentally-conscious investors.

Dividend growth

AptarGroup has a long track record of increasing its quarterly dividend, making it attractive for income investors.

Exposure to consumer spending

As a packaging company, AptarGroup’s performance is tied to consumer demand for beauty, personal care, and pharmaceutical products, which can be cyclical.

Input cost pressures

The company has faced headwinds from rising raw material, labor, and energy costs, which can impact margins if not passed on to customers through price increases.

Competition

The packaging industry is competitive, and AptarGroup faces rivalry from other players, which could impact pricing and market share.

Overall, AptarGroup’s consistent financial performance, strategic initiatives, innovation focus, and commitment to sustainability and dividends could make it an attractive long-term investment, provided the potential concerns are well-managed.

Back to Table of Contents

Technical Indicators Analysis

Next week trading:

The recent TEMA (Triple Exponential Moving Average) and RSI (Relative Strength Index) values suggest the stock may experience some short-term volatility and consolidation in the next week. The TEMA has been declining slightly, indicating a potential bearish trend in the near term. The RSI is around 50, suggesting the stock is neither overbought nor oversold, which could lead to range-bound trading in the coming week.

Resistance and Support Levels:

The 20-day, 50-day, and 200-day Simple Moving Averages (SMA_20, SMA_50, SMA_200) provide key support and resistance levels. The stock is currently trading above all three SMAs, indicating a bullish trend. The SMA_20 and SMA_50 could act as dynamic support levels, while the SMA_200 could provide a strong resistance level in the short to medium term.

Short Term Investor:

The recent increase in the ADX (Average Directional Index) value suggests a strengthening trend, which could be favorable for short-term investors. However, the RSI is around 50, indicating the stock is neither overbought nor oversold, which may limit the upside potential in the near term. Short-term investors should monitor the stock’s performance relative to the key moving averages and look for opportunities to enter or exit positions based on the prevailing market conditions.

Long Term Investor:

The overall technical picture appears positive for long-term investors. The stock is trading above all three SMAs, indicating a bullish long-term trend. The increasing ADX value suggests the trend is strengthening, which could be a positive sign for long-term investors. However, the recent decline in the TEMA and the RSI around 50 may warrant some caution in the short to medium term. Long-term investors should focus on the stock’s fundamental performance and the company’s long-term growth prospects, while also monitoring the technical indicators for potential changes in the trend.

Back to Table of Contents

Chart of Valuation History

"Chart of Valuation History"

Back to Table of Contents

Financial Statements Annual

Financial Statements Annual 2024 Q2

Diversified Business Model

Aptar has a diversified business model across three main segments – Aptar Pharma, Aptar Beauty, and Aptar Closures. This diversification helps mitigate risks and provides growth opportunities across different end markets.

Strong Pharma Segment Performance

The Aptar Pharma segment, which accounts for 44% of total sales, reported strong 12% core sales growth driven by continued demand for proprietary drug delivery systems in prescription and consumer healthcare markets. This segment also contributed 65% of the company’s adjusted EBITDA.

Improving Profitability

Aptar was able to expand its adjusted EBITDA margin from 18.6% in 2022 to 20.3% in 2023 through operational improvements and cost management initiatives, despite inflationary pressures.

Healthy Balance Sheet and Cash Flows

Aptar maintains a strong balance sheet with $224 million in cash and $915 million in net debt, representing a net debt to net capital ratio of 28.3%. The company generated $575 million in operating cash flow in 2023, allowing it to fund capital investments and return capital to shareholders.

Shareholder Returns

Aptar has a track record of returning capital to shareholders, having paid a dividend for 30 consecutive years. The company also repurchased $48 million of its shares in 2023.

Sustainability Focus

Aptar is focused on developing more sustainable product solutions, including those made with post-consumer recycled materials and designed for improved recyclability. This aligns with increasing customer and regulatory demands for more environmentally-friendly packaging.

Acquisition Integration

Aptar successfully integrated its recent acquisitions of Metaphase, iD SCENT, and Gulf Closures, which expanded its capabilities in design, fragrance sampling, and Middle East market presence.

Overall, Aptar’s diversified business model, strong Pharma segment, improving profitability, healthy financials, shareholder returns, and sustainability focus make it an attractive long-term investment opportunity.

Financial Statements Annual 2023 Q2

Diversified Business Model

Aptar operates across three main business segments – Pharma, Beauty Home, and Food Beverage. This diversification helps mitigate risks and provides growth opportunities across different end markets.

Consistent Revenue Growth

Aptar reported a 3% increase in reported net sales in 2022 to $3.32 billion. Excluding currency impacts and acquisitions, core sales grew 9% driven by both volume growth and price increases to offset inflationary costs.

Margin Improvement

Adjusted EBITDA margin improved to 18.6% in 2022 compared to 18.8% in 2021, demonstrating Aptar’s ability to manage costs and pass through price increases. The Pharma segment maintained strong profitability with a 32.4% Adjusted EBITDA margin.

Robust Cash Flow

Aptar generated $478.6 million in operating cash flow in 2022, up from $363.4 million in 2021. This provides ample liquidity to fund capital investments, acquisitions, and shareholder returns.

Disciplined Capital Allocation

Aptar continues to invest in capacity expansions, particularly in its Pharma and active material science solutions businesses. It also made strategic acquisitions like Metaphase, Voluntis, and Hengyu to enhance its product portfolio and capabilities. Additionally, Aptar returned $99.5 million to shareholders through dividends in 2022, marking the 29th consecutive year of dividend increases.

Strong Balance Sheet

Aptar maintains a healthy balance sheet with $141.7 million in cash and equivalents and $1.18 billion in total debt as of December 2022. The net debt to net capital ratio of 33.3% provides financial flexibility for future growth initiatives.

Sustainability Focus

Aptar is making progress on its sustainability goals, including reducing Scope 1 and 2 emissions and increasing the use of recycled content in its products. This positions the company well to meet evolving customer and regulatory demands around environmental impact.

Overall, Aptar’s diversified business model, consistent financial performance, disciplined capital allocation, and sustainability focus make it an attractive long-term investment opportunity for investors.

Financial Statements Annual 2022 Q2

Strong Organic Growth

The company reported solid core sales growth of 7% in 2021, excluding the impact of acquisitions and foreign currency. This was driven by strong performance in the Beauty Home and Food Beverage segments as sales recovered from pandemic-related declines in 2020.

Resilient Profitability

Despite inflationary pressures on input costs, the company was able to maintain adjusted EBITDA margins at 18.8% in 2021, exceeding pre-pandemic 2019 levels. This demonstrates the company’s ability to manage costs and pass through price increases.

Successful Acquisitions

The acquisitions of Voluntis and Hengyu in 2021 have expanded the company’s capabilities in digital health solutions and injectable drug delivery components, respectively. The successful integration of these acquisitions will be important for long-term growth.

Healthy Balance Sheet and Cash Flow

The company maintains a strong balance sheet with net debt to net capital of 35.1% as of December 31, 2021. Free cash flow generation of $57.5 million in 2021 provides financial flexibility for investments and shareholder returns.

Environmental, Social, and Governance (ESG) Leadership

The company’s ESG performance has been recognized through numerous awards and rankings, highlighting its commitment to sustainability and responsible business practices. This should position the company well with environmentally-conscious investors.

Overall, the financial statements demonstrate Aptar’s ability to drive organic growth, maintain profitability, execute strategic acquisitions, and generate strong cash flows – all while making progress on its ESG initiatives. These factors suggest the company is well-positioned for long-term value creation.

Back to Table of Contents

Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Revenue Growth

Reported net sales increased 6% to $915.4 million in Q1 2024 compared to $860.1 million in Q1 2023. Core sales, which exclude the impact of acquisitions and foreign currency, increased 5% driven by improved volumes and product mix. All three segments – Aptar Pharma, Aptar Beauty, and Aptar Closures – contributed to the core sales growth.

Profitability

Operating income increased 33% to $112.1 million in Q1 2024 compared to $83.9 million in Q1 2023. Adjusted EBITDA margin improved to 19.5% in Q1 2024 from 17.9% in Q1 2023, driven by strong performance in the Aptar Pharma segment. The effective tax rate decreased to 20.5% in Q1 2024 from 25.5% in Q1 2023, reflecting a favorable mix of earnings and increased tax benefits.

Segment Performance

Aptar Pharma segment net sales increased 14%, with core sales growth of 13%, driven by strong demand across all divisions. Aptar Beauty segment net sales were flat, with a 1% core sales decline due to softening demand in certain regions. Aptar Closures segment net sales increased 2%, with a 1% core sales growth, as the segment focused on operational improvements and cost management.

Cash Flow and Liquidity

Cash and equivalents decreased to $199.8 million at March 31, 2024, from $223.6 million at December 31, 2023. Total debt remained consistent at $1.1 billion, and the Net Debt to Net Capital ratio improved to 27.9% from 28.3%. Free cash flow was $16.7 million in Q1 2024, compared to $20.5 million in Q1 2023.

Outlook

The company expects continued strong performance in the Aptar Pharma segment and improving demand in the Beauty and Closures segments. Earnings per share for Q2 2024 is expected to be in the range of $1.30 to $1.38, excluding any restructuring expenses, changes in equity investments, and acquisition costs. Capital expenditures for 2024 are estimated to be $280 million to $300 million, net of government grants.

Overall, the financial statements show strong revenue growth, improved profitability, and a healthy financial position, with the Aptar Pharma segment driving the majority of the performance. The company is optimistic about its outlook for the rest of 2024.

Financial Statements Quarterly 2024 Q1

Revenue Growth

Consolidated net sales increased 7% in Q3 2023 and 5% in the first 9 months of 2023 compared to the prior year periods. The growth was driven by strong volume increases, especially in the Pharma and Beauty segments, as well as price increases to offset inflationary costs.

Segment Performance

  • Aptar Pharma segment saw 13% revenue growth in Q3 2023 and 11% growth in the first 9 months, driven by strong demand for prescription drug and consumer healthcare products.
  • Aptar Beauty segment grew 7% in Q3 2023 and 5% in the first 9 months, with strong performance in Europe and Latin America offsetting softness in North America.
  • Aptar Closures segment declined 6% in Q3 2023 and 7% in the first 9 months, primarily due to passing through lower input costs and lower product and tooling sales.

Profitability

Adjusted EBITDA margin improved to 21.7% in Q3 2023 from 18.4% in Q3 2022, driven by the strong Pharma segment performance and SG&A leverage. For the first 9 months, Adjusted EBITDA margin increased to 19.9% from 18.6% in the prior year period.

Cash Flow and Liquidity

Operating cash flow increased to $355.6 million in the first 9 months of 2023 compared to $306.3 million in the prior year period. The company has a strong balance sheet with $151.6 million in cash and equivalents and a net debt to net capital ratio of 31.5% as of September 30, 2023.

Restructuring Initiatives

The company incurred $19.6 million in restructuring costs in the first 9 months of 2023 related to its optimization initiative to better leverage its fixed cost base.

Overall, the financial statements show Aptar delivering solid revenue growth and profitability improvements, particularly in its higher-margin Pharma segment, while managing through inflationary pressures and executing on its cost optimization initiatives.

Financial Statements Quarterly 2023 Q4

Strong revenue growth

Aptar reported a 6% increase in net sales in Q2 2023 compared to Q2 2022, driven by 4% core sales growth (excluding acquisitions and currency impacts). This was primarily due to strong volume growth, especially in prescription drug, consumer healthcare, and beauty applications. For the first half of 2023, net sales increased 4%, with 4% core sales growth.

Improved profitability

Adjusted EBITDA margin improved across all three segments in Q2 2023 compared to Q2 2022. The Aptar Closures segment saw the biggest improvement, with adjusted EBITDA margin increasing from 114% to 158%, driven by operational improvements and favorable product mix. Overall, the company’s adjusted EBITDA margin increased from 189% in Q2 2022 to 202% in Q2 2023.

Continued investment for growth

Aptar invested $155 million in capital expenditures in the first half of 2023, a 5% increase compared to the prior year period, to support its growth strategy, including several new manufacturing facilities. The company expects full-year 2023 capital expenditures, net of government grants, to be in the range of $280-$300 million.

Disciplined capital allocation

Aptar returned $498 million to shareholders through dividends and $290 million through share repurchases in the first half of 2023. The company’s net debt to net capital ratio increased slightly from 33.3% at the end of 2022 to 33.6% at the end of Q2 2023, indicating a continued conservative financial position.

Successful integration of acquisitions

Aptar completed the acquisitions of Metaphase, iD SCENT, and Gulf Closures in 2022 and 2023, which contributed positively to the company’s results in the first half of 2023. The integration of these acquisitions appears to be progressing well.

Ongoing optimization initiatives

Aptar incurred $13.5 million in restructuring costs in the first half of 2023 related to its optimization initiative to better leverage its fixed cost base. The company expects these initiatives to continue to impact results in the near-term but position it for long-term profitable growth.

Overall, Aptar’s financial performance in the first half of 2023 demonstrates its ability to drive organic growth, improve profitability, and prudently allocate capital – all of which should be attractive to long-term investors.

Financial Statements Quarterly 2023 Q3

Net Sales

Net sales increased 2% to $860.1 million in Q1 2023 compared to Q1 2022. Excluding the impact of foreign currency and acquisitions, core sales grew 4% driven by strong volume growth, especially in prescription consumer healthcare and beauty applications, as well as price increases to recover inflationary costs.

Gross Profit Margin

Gross profit margin decreased to 37.5% in Q1 2023 from 38.4% in Q1 2022 due to incremental startup costs and inefficiencies in the injectables division capacity expansion and ERP system implementation.

Operating Income

Operating income decreased 13.8% to $83.9 million in Q1 2023 compared to $97.7 million in Q1 2022, mainly due to $11.5 million in restructuring costs related to the company’s optimization initiative.

Effective Tax Rate

The effective tax rate decreased to 25.5% in Q1 2023 from 28.0% in Q1 2022, reflecting tax benefits from amended U.S. tax filings and increased tax benefits from share-based compensation.

Net Income

Net income attributable to AptarGroup decreased 12.3% to $54.8 million in Q1 2023 from $62.4 million in Q1 2022.

Segment Performance

  • Aptar Pharma segment sales grew 4% driven by strong demand in prescription drug and consumer healthcare markets, partially offset by lower sales in injectables and active material science solutions.
  • Aptar Beauty segment sales grew 6% on strong demand in beauty and personal care markets.
  • Aptar Closures segment sales declined 8% primarily due to passing through lower resin costs.

Financial Position

The company had $126.8 million in cash and equivalents and $1.23 billion in total debt as of March 31, 2023, resulting in a net debt to net capital ratio of 33.3%.

Outlook

The company provided Q2 2023 earnings per share guidance in the range of $1.11 to $1.19, excluding any restructuring expenses, changes in equity investment fair value, and acquisition costs.

Back to Table of Contents

Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Pharma segment performance

The Pharma segment has seen strong growth in proprietary drug delivery systems, which is expected to continue within the 7-11% long-term core sales target range. The Injectables unit has also seen marked improvement, with capacity expansions coming online in 2025 to serve growing demand. The company has experienced diverse growth across end markets like emergency medicines, allergy treatments, and central nervous system therapeutics.

Operational efficiency and cost management

The company has ongoing initiatives to reduce fixed costs and improve margins, including facility closures and workforce reductions in Europe. They are also reducing SG&A as a percentage of sales, with a target of 15.1% by Q4 2024. The company is streamlining its global footprint to increase operational leverage while meeting market demand.

Innovation and new product launches

The company maintains a continued focus on developing sustainable and innovative solutions across its Pharma, Beauty, and Closures segments. They have had successful launches of proprietary drug delivery systems, fragrance dispensing solutions, and recyclable/reloadable packaging technologies.

Market dynamics and recovery

The North American consumer markets are showing signs of recovery from destocking, though the pace may vary across end markets. Fragrance dispensing solutions are expected to grow at a more measured pace after a strong 2023. Beverage closures in Europe are facing some timing issues related to customer transitions to tethered caps, but there are no major long-term concerns.

Financial performance and outlook

The company reported strong Q1 2024 results with core sales growth of 5% and adjusted EPS growth of over 30%. The guidance for Q2 2024 adjusted EPS is in the range of $1.30 to $1.38 per share. The company has a healthy balance sheet and cash flow position, allowing for continued investment in the business and shareholder returns.

Overall, the company appears to be executing well on its strategic priorities, with a focus on innovation, operational efficiency, and capitalizing on growth opportunities in the Pharma segment. The long-term investor should closely monitor the company’s ability to maintain its momentum, manage costs effectively, and navigate any potential market challenges.

Earnings Call Analysis 2024 Q1

Pharma segment is the growth driver

The Pharma segment delivered 10% core sales growth in 2023, driven by strong demand for proprietary drug delivery systems across various applications like emergency medicines, allergic rhinitis, and central nervous system therapeutics. This pipeline-driven business has a long development cycle of 5-15 years, but the company is seeing the benefits now with the highest number of new product launches since 2018.

Margin expansion focus

The company is focused on improving margins across all segments through cost management, restructuring actions, and productivity improvements. This includes reducing SG&A expenses as a percentage of sales and optimizing manufacturing operations. The margin expansion efforts are expected to continue in 2024.

Diversifying manufacturing footprint in Asia

The company is forming a joint venture in China to access cost-effective pump manufacturing, faster go-to-market capabilities, and a more complete local supply chain. This partnership is expected to increase the company’s profitability in China and the broader Asian market.

Cautious on analyst questions

The analysts probed for more details on the China joint venture, particularly around IP protection, as well as the long-term outlook for the Pharma segment’s biologics business. The company provided limited specifics, indicating a cautious approach to disclosing sensitive information.

Sustainability and ESG recognition

The company received recognition from Newsweek and Forbes for its sustainability and being a top company for women, which could be attractive for long-term investors focused on ESG factors.

Overall, the key insights suggest that the Pharma segment is the primary growth driver, the company is focused on margin expansion, and it is taking strategic steps to enhance its manufacturing capabilities in Asia. However, the company’s cautious approach to disclosing certain details warrants close monitoring by long-term investors.

Earnings Call Analysis 2023 Q4

Pharma segment growth

The company’s proprietary drug delivery systems, particularly for applications like allergic rhinitis, emergency medicine, central nervous system therapeutics, and asthma/COPD, have seen significant growth. This appears to be a key driver of the company’s performance.

Potential headwinds in Pharma

The strong growth in Narcan and generic naloxone sales may face headwinds as the initial inventory build-up is cycled through. However, the company believes adoption of these life-saving drugs will continue to expand.

Fragrance performance

The fragrance dispensing solutions have seen robust demand, particularly in Europe and Latin America. This appears to be a bright spot, though the company expects growth to moderate going forward.

North America personal care and home care challenges

The company has faced substantial declines in these end markets in North America, which it believes are related to destocking. However, the company expects this to normalize by the end of 2023 or early 2024.

Cost management initiatives

The company has been focused on reducing SG&A and manufacturing fixed costs, which have contributed to margin expansion. The planned closure of the Poincy, France facility is expected to yield further savings starting in 2024-2025.

Injectables capacity expansion

The company is investing in expanding its injectables capacity, which is expected to come online in phases and be ready for commercialization by early 2025.

Analyst questions highlight

The analysts probed for potential headwinds, such as the inventory build-up in Pharma and the sustainability of fragrance growth, which provides useful context for long-term investors.

Overall, the company appears to be executing well, with strong growth in its Pharma segment and cost management initiatives driving margin expansion. However, the North America personal care and home care challenges, as well as the potential for Pharma growth to moderate, warrant close monitoring by long-term investors.

Earnings Call Analysis 2023 Q3

Pharma segment strength

The Pharma segment has seen robust demand for Aptar’s proprietary drug delivery systems across various end-use categories like nasal decongestants, saline rinses, eye care, and respiratory therapies. This has driven strong growth in the segment, representing about 26% of total company revenue.

Regulatory expertise and services

Aptar’s decades of regulatory expertise and the suite of services it provides, such as clinical trial support and digital therapeutics, position the company as a preferred partner for small to mid-sized pharma companies navigating the lengthy drug approval process.

Injectables capacity expansion

Aptar is investing in expanding its injectables capacity, which is expected to increase its focus on premium solutions and higher-value products suitable for biologics like GLP-1 drugs. However, the start-up costs and ERP implementation are creating a temporary drag on earnings.

Beauty segment performance

The Beauty segment has seen solid growth in prestige and mass fragrance solutions, particularly in Europe and Latin America, while the recovery in China is more gradual. The new state-of-the-art beauty site in France is expected to provide unique customized packaging solutions.

Closure segment challenges

The Closure segment has faced lower demand in personal care and home care, primarily in North America, due to customer destocking. However, the segment has improved its operational leverage and profitability.

ESG and sustainability

Aptar’s leading position in sustainability is viewed as a competitive advantage, and the company continues to be recognized for its achievements in this area.

Capital allocation and shareholder returns

Aptar has a strong balance sheet and has been returning capital to shareholders through dividends and share repurchases, including a recent dividend increase, demonstrating confidence in the company’s performance and financial position.

Overall, the key insights suggest that Aptar’s Pharma segment and its regulatory expertise are driving strong growth, while the company is also making strategic investments in its Beauty and Injectables businesses. The company’s focus on sustainability and shareholder returns are also positive factors for long-term investors.

Earnings Call Analysis 2023 Q2

Aptar’s Pharma Segment Experiencing Strong Demand

Aptar’s Pharma segment is experiencing strong demand for its proprietary dispensing devices across various end-use categories, including nasal allergy treatments, respiratory ailments, and emergency medicines. This growth is expected to remain in the 6-10% target range long-term.

Injectables Division Facing Temporary Challenges

The company’s injectables division faced some temporary challenges due to an ERP system implementation, but these issues are expected to be resolved by the end of the year. The underlying demand for elastomeric components used in injectable medications, particularly for GLP-1 drugs, remains strong.

Strategic Investments in Production Capacity

Aptar is making strategic investments to increase production capacity for its proprietary pharma dispensing devices to meet rapidly growing customer demand. These investments are expected to generate returns well above 20%.

Improving Operational Efficiency and Profitability

The company is focused on improving operational efficiency and profitability, particularly in the Beauty and Closures segments, through footprint optimization and labor negotiations.

Realignment of Beauty and Closures Segments

Aptar’s recent realignment of its Beauty and Closures segments is expected to strengthen its commercial position and enable bottom-line improvements through streamlined operations and increased capital efficiencies.

Strong Pipeline of Proprietary Pharma Technologies

The company’s pipeline of proprietary pharma technologies remains strong, with new product launches in areas like nasal delivery devices for migraine and depression treatments.

Commitment to Sustainability and ESG Initiatives

Aptar’s commitment to sustainability and ESG initiatives, such as recyclable pumps, is seen as a competitive advantage in the long run.

Overall, the key insights suggest that Aptar is well-positioned to capitalize on the strong demand for its proprietary pharma solutions and is taking steps to improve operational efficiency and profitability across its business segments, which should benefit long-term investors.

Earnings Call Analysis 2023 Q1

Segment Realignment

The strategic realignment of the closures and non-pharma complex multi-component dispensing solutions is expected to strengthen market position, enable entry into new markets, capture efficiencies, and increase capital efficiencies. This suggests the company is focused on optimizing its portfolio and operations.

Cost Reduction Efforts

The company is working to reduce its fixed costs and drive profitable growth and margin improvements, including through plant consolidations and shared business function expansions. This indicates a focus on improving profitability.

Capital Allocation

The company is focusing capital investments on the higher-growth and higher-margin pharma segment, with major projects in injectables, premium beauty, and a new facility in China. This suggests a disciplined approach to capital allocation.

Innovation Pipeline

The company highlighted new product launches and innovations across its pharma, beauty, and food & beverage segments, demonstrating a commitment to innovation and meeting customer needs.

Sustainability Focus

The company is advancing its sustainability efforts, with recognition for its sustainability initiatives. This suggests a long-term focus on environmental and social responsibility.

Inventory Destocking

The company is seeing inventory destocking in its food, personal care, and home care segments, primarily in North America. This could be a near-term headwind, but the company is working with customers to manage the situation.

Overall, the key insights point to a company focused on optimizing its operations, investing in high-growth and high-margin opportunities, innovating, and maintaining a strong sustainability focus – all of which could benefit long-term investors.

Earnings Call Analysis 2022 Q4

Macroeconomic Headwinds

Aptar is facing significant macroeconomic headwinds, including currency fluctuations, rising costs (energy, labor, transportation), and softening consumer demand, particularly in North America. This has led to a “whiplash” in demand that the company has not seen before.

Pharma Segment Strength

The company’s pharma segment remains a bright spot, with strong growth across prescription, consumer healthcare, and active materials. Aptar is investing in digital health solutions and pharmaceutical services to further strengthen this higher-margin, faster-growing business.

Challenges in Other Segments

The Beauty + Home and Food + Beverage segments are facing more challenges, with mixed regional performance and softening demand, especially in North America. The company is taking actions like shutting down underutilized facilities, but may need to consider more aggressive restructuring measures.

Capital Allocation and Margin Targets

Aptar has a strong balance sheet and is focused on selective and disciplined capital allocation, prioritizing the higher-growth pharma business. However, the long-term margin targets for Beauty + Home and Food + Beverage remain elusive, and the company may need to reevaluate its approach in these segments.

Analyst Skepticism

Analyst questions suggest skepticism about the company’s ability to manage customer ordering patterns and inventory levels, which could indicate challenges in maintaining pricing power and profitability, especially in the more commoditized segments.

Overall, the key insights point to Aptar facing significant near-term headwinds, with the pharma business providing a relative bright spot, but the company may need to take more aggressive actions to address the challenges in its other segments to achieve its long-term financial targets.

Earnings Call Analysis 2022 Q3

Diversified business model

Aptar operates across multiple end markets (beauty, personal care, home care, prescription drugs, consumer healthcare, food and beverage) and geographies, providing resilience against downturns in any single market.

Pharma segment strength

The pharma segment, which now accounts for 40% of the business, has shown strong double-digit core sales growth and is expected to continue performing well, benefiting from recovery in prescription drugs and consumer healthcare. This segment provides stability and growth potential.

Pricing power and cost management

Aptar has been able to implement pricing initiatives to offset rising input costs, though it has not yet fully recovered prior year cost increases. Continued focus on pricing and cost management will be important.

Sustainability initiatives

Aptar is actively investing in sustainable solutions and reducing its environmental footprint, which is important for meeting customer demands and future-proofing the business.

Capital allocation

Aptar has a history of prudent capital allocation, investing in the business, making strategic acquisitions, and returning capital to shareholders through dividends and share repurchases. This disciplined approach should continue to create shareholder value.

Analyst questions

The analysts probed for more details on start-up costs, price/cost dynamics, labor shortages, and the potential impact of a recession – suggesting these are important factors to monitor going forward.

Overall, Aptar’s diversified business model, strong pharma segment, pricing power, sustainability focus, and disciplined capital allocation provide a solid foundation for long-term investors. However, the company will need to continue navigating macroeconomic challenges and cost pressures.

Earnings Call Analysis 2022 Q2

Resilience in uncertain environment

Despite facing various macroeconomic headwinds like the war in Ukraine, COVID-19 lockdowns in China, supply chain issues, and inflation, Aptar has demonstrated resilience and delivered solid financial performance in Q1.

Diversified business model

Aptar operates across three diverse segments – Pharma, Beauty + Home, and Food + Beverage. This diversification helps mitigate risks and provides growth opportunities across different end markets.

Pricing power and cost management

Aptar has been able to implement multiple rounds of price increases to recover rising input costs. However, the pace of cost inflation, especially in Europe, remains a concern and could impact margins if not managed effectively.

Pharma segment strength

The Pharma segment has been a strong performer, driven by double-digit core sales growth across prescription, consumer healthcare, injectables, and active material science markets. This segment’s growth potential seems promising.

Sustainability initiatives

Aptar’s collaboration with PureCycle Technologies to develop recycled polypropylene for dispensing applications demonstrates its focus on sustainability and circular economy.

Cautious outlook on China

While China remains an important market, the management seems to have a more cautious outlook given the geopolitical tensions and the recent COVID-19 lockdowns, which could impact demand in the near term.

Margin improvement opportunities

The management highlighted potential opportunities to improve margins in the Beauty + Home and Food + Beverage segments, which have been impacted by the pass-through of higher costs.

Strong balance sheet and capital allocation

Aptar has a strong balance sheet, which allows it to continue investing in growth initiatives and return capital to shareholders through dividends and share repurchases.

Overall, Aptar appears to be a resilient and diversified company navigating the current macroeconomic challenges, with a focus on growth, cost management, and sustainability. However, the management’s cautious outlook on China and the pace of margin recovery in certain segments warrant close monitoring by long-term investors.

Earnings Call Analysis 2022 Q1

Pharma Segment

The Pharma segment is seeing strong demand for solutions related to vaccines, injectable medicines, and consumer healthcare products. This is expected to continue. Aptar is investing significantly to expand capacity for premium coated elastomeric components, which are in high demand. This includes a €180 million investment plan. The Active Material Solutions business is performing very well, especially in applications like COVID-19 test kits. This appears to be a growth area. Aptar is expanding its Pharma presence in Asia through new facilities in China and India.

Beauty + Home Segment

The Beauty + Home segment is still below 2019 volume levels due to the impact of COVID-19 variants and supply chain/labor challenges, particularly in North America. Aptar is focused on cost containment, footprint optimization, and product innovation to improve margins in this segment, which have not yet reached the target range. The recovery in this segment is uneven, with Europe and China performing better than Latin America.

Food + Beverage Segment

This segment saw strong demand and double-digit core sales growth, though margins were compressed due to the significant pass-through of resin cost increases. Aptar expects the net price-cost impact to improve in the near-term as some raw material costs, like resin, are expected to trend lower.

Overall

Aptar has a strong balance sheet and is well-positioned to continue investing in growth opportunities, including strategic M&A. The company is focused on sustainability and has received recognition for its efforts in this area. Aptar is navigating the current challenges of the pandemic, inflation, supply chain issues, and labor shortages, but remains optimistic about the long-term growth prospects across its segments.

The analyst questions suggest some caution around the pace of recovery in the Beauty + Home segment and the potential for volatility in the Pharma segment due to factors like destocking and lumpiness in certain product categories. Overall, Aptar appears to be taking the right steps to position itself for long-term growth, though near-term headwinds may persist.

Earnings Call Analysis 2021 Q4

Diverse product portfolio and shared technologies

Diverse product portfolio and shared technologies across segments have enabled the company to serve multiple markets and deliver strong top-line growth despite challenges.

Pharma segment headwinds

The pharma segment has faced headwinds from inventory destocking by customers, particularly in the prescription drug market, due to fewer doctor visits during the pandemic. This is expected to normalize by Q4 2021.

Strong growth in other segments

The beauty and home, and food and beverage segments have seen double-digit core growth, driven by increased volumes and pricing actions to offset rapidly accelerating inflation and supply chain challenges.

Strategic investments

The company is making strategic investments to expand capacity in key areas like elastomer components for injectable medicines and its Activ-Film technology, which is seeing high demand.

Acquisitions

Acquisitions like Weihai Hengyu and Voluntis are expanding the company’s capabilities in China and digital health solutions, respectively, though they will be dilutive to earnings in the near-term.

Headwinds from external factors

The company is facing significant headwinds from labor shortages, especially in North America, and global logistics/supply chain disruptions, which are impacting costs and margins. Pricing actions are the primary lever to offset these pressures.

Cautious outlook

The outlook for Q4 2021 and 2022 remains cautious, with the company expecting continued challenges from inflation, supply chain, and mix effects, though the underlying business trends appear positive.

Overall, the company seems well-positioned with its diversified portfolio and growth investments, but near-term headwinds from external factors will require close monitoring by long-term investors.

Earnings Call Analysis 2021 Q3

Diversified portfolio and market presence

Aptar has a wide breadth of solutions and services across the Pharma, Beauty + Home, and Food + Beverage segments, which has enabled the company to generate growth even when conditions are not ordinary in each individual market.

Pharma segment dynamics

The Pharma segment has seen mixed performance, with strong demand for elastomeric components for injectable drugs and active material solutions offsetting declines in prescription and consumer healthcare markets due to customer inventory drawdowns. The company sees the prescription drug market improving in Q4.

Inflationary pressures

Aptar is facing significant inflationary pressures, particularly on raw material costs, which are negatively impacting margins. The company is working to pass through these higher costs to customers, but this has a compressing effect on margins.

Strategic acquisitions and partnerships

Aptar is actively pursuing strategic acquisitions and partnerships to expand its capabilities, particularly in the digital health and injectable drug components spaces. While these investments may be dilutive in the short-term, the company sees them as important for long-term growth.

Sustainability initiatives

Aptar is making progress on its sustainability goals, including increasing the recyclability of its products and investing in recycled material supply. However, the success of these initiatives is highly dependent on customer adoption.

Cautious optimism on recovery

Aptar expects a stronger recovery towards the end of 2021, particularly in the Pharma and Beauty + Home segments. However, the pace of recovery remains uncertain, especially due to the impact of COVID-19 variants and limited international travel.

Overall, Aptar appears to be well-positioned for long-term growth, but investors should be mindful of the near-term headwinds from inflation and the uneven pace of recovery across the company’s end markets.

Back to Table of Contents

The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.