Aptar’s Pharma Business Drives Growth

Narrow-moat Aptar ATR delivered solid fourth-quarter and full-year results driven primarily by its pharma business and volume growth in beauty and home. Full-year results were in line with our assumptions, and we are maintaining our $132 fair value estimate. The shares appear undervalued.

For the quarter, Aptar saw core sales (excluding exchange-rate and acquisition impacts) grow 4% and reported sales decline 2% year over year. On an annual basis, each segment achieved top-line growth, contributing to core sales growth of 9% and reported sales growth of 3%. Strong performance of the prescription and consumer healthcare division and dispensing solutions within beauty drove sales for the year. Although the company will continue to leverage fixed costs to drive margin improvement, margins remained compressed, as increased pricing was met with inflationary costs, foreign-exchange headwinds, and continued rising costs in energy and labor.

We believe Aptar has the ability to increase earnings with revenue growth in the midsingle digits in our explicit forecast. Our confidence is fueled mainly by the pharma segment, which delivered 6% reported sales growth (13% core sales growth) year over year amid macroeconomic headwinds and global uncertainty. Aptar’s competitive advantage here allows it to meet favorable trends in the industry, such as the growing transition to over-the-counter allergy drugs and the expanding consumer healthcare industry. We project softer growth rates for the company’s other segments, beauty and home and food and beverage, which delivered reported sales growth of 0% and 3%, respectively. We still find these to be strong results as customers in both segments continue to work through slowed inventory affected by the coronavirus.