On Monday, Jefferies upgraded shares of AptarGroup (NYSE:ATR), a company listed on the New York Stock Exchange under the ticker NYSE:ATR, from Hold to Buy and significantly increased the price target to $215 from the previous $155. The firm's optimistic outlook is based on the company's solid performance and promising product pipeline.
AptarGroup's stock has shown a notable performance year-to-date, with an approximate 30% increase, outpacing the S&P 500's 22% gain. The upgrade by Jefferies reflects confidence in the company's growth prospects, particularly within its Pharma segment. Analysts at Jefferies forecast an 8.5% compound annual growth rate (CAGR) in overall EBITDA through 2026 for AptarGroup, which is higher than the consensus estimate of 6.7%.
The positive sentiment is underpinned by AptarGroup's strong pipeline of new products, including innovative delivery systems for GLP-1 drugs, over-the-counter Narcan, and Neffy, an epinephrine nasal spray. These developments are expected to significantly contribute to the company's growth in the pharmaceutical sector.
According to Jefferies, the valuation multiple for AptarGroup is anticipated to align with the higher end of the historical 5-year average, which ranges between 10 to 17 times the EV/EBITDA. The firm's sum-of-the-parts (SOTP) model supports the new price target of $215.
The upgrade to Buy status suggests that Jefferies sees a more favorable risk-reward scenario for investors at current levels, with expectations of continued financial growth and market performance for AptarGroup.
In other recent news, AptarGroup Inc . has approved a $500 million stock buyback plan, replacing all previous repurchase authorizations. The company also declared a quarterly cash dividend of $0.45 per share. AptarGroup's President and CEO, Stephan Tanda, noted that the company has returned over $780 million to shareholders through dividends and stock repurchases in the past five years.
In terms of earnings and revenue, AptarGroup reported a 12% rise in adjusted earnings per share (EPS) and a 3% increase in overall core sales for the second quarter of 2024, mainly driven by a 7% increase in core sales in its pharma segment. However, the beauty segment saw a decline due to weaker sales in Europe.
Analysts from Baird and BofA Securities maintained their positive stance on AptarGroup. Baird emphasized the company's robust portfolio, particularly the pharmaceutical division, and operational improvements in its Packaging (NYSE:PKG) segment. BofA Securities maintained its Buy rating and increased the price target to $174 from $168.
In other developments, AptarGroup's N-Sorb nitrosamine mitigation solution was accepted into the U.S. Food & Drug Administration's Emerging Technology Program. Looking forward, Aptar anticipates growth in the pharma segment to continue into the third quarter, with predicted adjusted EPS between $1.38 and $1.46 per share. The company maintains a solid balance sheet, a leverage ratio of approximately 1.3, and is open to bolt-on acquisitions.
InvestingPro Insights
AptarGroup's recent upgrade by Jefferies aligns well with several key metrics and insights from InvestingPro. The company's strong market position is reflected in its market capitalization of $10.73 billion. AptarGroup's revenue growth of 4.96% over the last twelve months and a robust EBITDA growth of 17.12% in the same period support Jefferies' optimistic outlook on the company's future performance.
InvestingPro Tips highlight AptarGroup's financial stability and growth potential. The company has raised its dividend for 32 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the 18.42% dividend growth in the last twelve months. Additionally, AptarGroup's stock is trading near its 52-week high, with a year-to-date price total return of 31.89%, outperforming the S&P 500 as mentioned in the article.
The company's profitability is underscored by InvestingPro Data showing a gross profit margin of 36.94% and an operating income margin of 13.61%. These figures support Jefferies' projection of continued EBITDA growth. For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for AptarGroup, providing a deeper understanding of the company's financial health and market position.
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