• Core Sales Growth: 2% for the third quarter.
• Adjusted EPS: $1.49 per share, a 6% increase over the prior year's quarter.
• Adjusted EBITDA Margin: 23% for the quarter.
• Pharma Segment Core Sales Growth: 12% in the quarter.
• Pharma Adjusted EBITDA Margin: 36%, a 1-point improvement from the prior year quarter.
• Closures Segment Core Sales Growth: 4% for the quarter.
• Closures Adjusted EBITDA Margin: 17% for the quarter.
• Free Cash Flow: $255 million for the nine months ended September 30, more than doubled from the prior year.
• Capital Expenditures: Approximately $66 million for the third quarter.
• Depreciation and Amortization Expense: Approximately $67 million for the third quarter.
• Fourth Quarter Adjusted EPS Guidance: $1.22 to $1.30 per share.
• Full Year Adjusted EPS Guidance: $5.34 to $5.42, a double-digit increase over 2023.
• Leverage Ratio: Approximately 1.1.
• Share Repurchases: About 95,000 shares for approximately $14 million in the quarter.

• Warning! GuruFocus has detected 6 Warning Signs with ATR.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AptarGroup Inc (NYSE:ATR) reported a 2% core sales growth and a 6% increase in adjusted EPS to $1.49 per share for the third quarter.
• The pharma segment showed strong performance with 12% core sales growth, driven by demand for proprietary drug delivery systems.
• The closures segment returned to its long-term target range with a 4% core sales growth and improved margins due to cost reduction efforts.
• AptarGroup Inc (NYSE:ATR) secured a contract from the US federal government to advance its ActivShield sterilization technology.
• The company completed a joint venture in China, enhancing its competitive edge with cost-effective pump manufacturing and a complete local supply chain.

Negative Points

• The beauty segment experienced a 6% decline in core sales, attributed to lower tooling sales and less favorable product mix.
• Injectables core sales decreased by 12% due to a difficult comparison with substantial service revenue in the prior year.
• The company noted a challenging macro environment for the beauty segment, with continued weakness in China.
• There is potential for lumpiness in royalty revenues, which could impact future financial stability.
• AptarGroup Inc (NYSE:ATR) anticipates some seasonal inventory rightsizing in the beauty and cough and cold end markets, which may affect short-term sales.

Q & A Highlights

Q: Do you have the elements in place for the beauty segment to achieve a 15% margin in 2025, and how is China impacting this? A: Stephan Tanda, CEO, noted that while beauty is progressing, the fragrance segment is holding it back due to high inventory levels. North America is recovering, but China has not rebounded as expected post-COVID, affecting sales in Europe as well. The lack of growth in China is a concern, but there is optimism if all regions perform well.

Q: On the pharmaceutical side, is the new product cadence higher than usual, and how does this affect the 2025 outlook? A: Stephan Tanda, CEO, expressed confidence in the continued growth of the pharma segment within its target range. Bob Kuhn, CFO, added that new therapies and growth in core areas contribute to this outlook, but specifics on the growth rate were not disclosed.

Q: Regarding prestige fragrances, what specific weaknesses are you seeing that seem disproportionate? A: Stephan Tanda, CEO, explained that while consumer sell-through remains positive, the inventory channel stocking was higher than sell-through, leading to a temporary decline. The company remains optimistic about a rebound as the holiday season approaches.

Q: Can you provide more details on the opportunity for nasally delivered treatments targeting the brain? A: Stephan Tanda, CEO, explained that nasally delivered treatments targeting the brain are attractive for pharma clients due to better delivery routes and lifecycle management opportunities. This area is a sweet spot for Aptar in terms of profitability and is generating more royalty revenue.

Q: Is there more facility rightsizing required to achieve desired margins in the beauty segment? A: Stephan Tanda, CEO, mentioned that while there are more ideas for rightsizing, they are not prerequisites for achieving a 15% margin but rather for exceeding it. The focus remains on productivity improvements and market recovery.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.