Aptar Earnings: Maintaining $132 Fair Value After a Sound Start to the Year

Narrow-moat Aptar ATR posted solid first-quarter results. The firm saw a 4% increase in core sales year over year driven by strong demand in the pharmaceutical and beauty segments. In addition to higher volumes, the firm was able to increase prices to keep up with raw material inflation, despite resistance to pricing in prior quarters. We reaffirm our fair value estimate of $132 per share based on the firm’s sound start to the year.

At the segment level, pharmaceuticals saw core growth of 7% driven by broad demand across health products. Performance was partially offset by the loss in revenue from at-home COVID-19 test kits. Injectables results were also weaker due to the implementation of a new enterprise resource planning system and resulting shipping delays for the quarter, though underlying demand appears solid. The beauty segment (formerly beauty and home) grew by 9% driven by sun care and cosmetics demand, while home care sales were much lower due to expected weakness in air care and surface disinfectant categories. The closures segment (formerly food and beverage) saw core sales decline by 8% primarily since lower resin prices used in spouts and caps were passed on to the customer.

Looking ahead, we’re expecting to see light moderation in the beauty segment due to customers destocking built-up inventory, based on management commentary. On the other hand, closures segment customers are further along with destocking, so sales may accelerate in the next quarter or two. Beyond this, the firm will continue to look for opportunities to grow its high-margin healthcare business incrementally, particularly within emerging markets.