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Phibro Animal Health (PAHC) Q4 Earnings Top, Decline Y/Y
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Phibro Animal Health Corporation(PAHC - Free Report) reported adjusted earnings per share (EPS) of 40 cents in the fourth quarter of fiscal 2016, reflecting a decline of 9.1% from the year-ago quarter. Adjusted EPS however surpassed the Zacks Consensus Estimate by 5.3%.
Per management, increased depreciation expense, interest expense and income taxes accounted for approximately 7 cents of the bottom-line decline, which was partially mitigated by adjusted EBITDA that contributed growth of 3 cents.
Including one-time items, the company reported EPS of 38 cents, reflecting an increase of 46.2% from the year-ago quarter’s comparable figure of 26 cents.
For full fiscal 2016, the company delivered adjusted EPS of $1.61, exhibiting a decline of 6% year over year. The full fiscal adjusted EPS beat the Zacks Consensus Estimate by a couple of cents. However, excluding the 2015 vaccine milestone licensing revenue and income, adjusted EPS increased 6%.
In the reported quarter, Phibro’s net sales improved 2.3% year over year to $189.2 million. The top-line improvement was driven by sales growth in Animal Health and Performance Products segments, which was partially offset by declines observed in Mineral Nutrition sales.
For fiscal 2016, the company generated net sales of $751.5 million, reflecting a meagre year-over-year improvement of 0.4%. The top-line improvement was driven by sales growth observed in the Animal Health segment, which was again partially neutralized by declines in Mineral Nutrition and Performance Products segments’ sales.
Sales by Segments
Net sales at the Animal Health segment increased 7% to $126.2 million in the reported quarter on the back of volume increases observed across all product groups of this segment. Sales from Vaccines increased 29%, including results from the MVP Laboratories’ acquisition, partly offset by decline in certain vaccine sales. Nutritional specialty products sales grew 14%, owing to volume growth in the U.S. for Phibro’s dairy and poultry products. On the other hand, sales at MFAs and Other (the biggest section of this segment) rose 3% on volume growth in Brazil and other international markets, partially offset by declines in U.S. sales of certain MFAs.
Net sales at the Mineral Nutrition segment slumped 9% to $50.3 million, owing to lower average selling prices on account of declines observed in underlying raw material commodity price. Slightly reduced volumes on seasonal variations in demand for trace mineral products also contributed to this segment’s deterioration.
Net sales at the Performance Products segment increased 6% to $12.7 million on higher volumes of copper-based and industrial chemical products. However, lower average selling prices of copper-based products partially neutralized this growth.
Operational Update
Phibro’s adjusted gross profit increased 1.6% year over year (excluding acquisition-related cost of goods sold and acquisition-related amortization) to $61.8 million. However, the adjusted gross margin dropped 20 basis points (bps) to 32.7%.
Adjusted selling, general and administrative expenses increased 1.3% to $38.8 million. Adjusted operating margin was almost flat year over year at 12.2% in the quarter.
Financial Update
At the end of fiscal 2016, Phibro generated $26.6 million in cash flow from operations compared with the year-ago figure of $21.9 million. Capital expenditure amounted to $7.7 million in the quarter, highlighting a 10% increase from $7 million incurred in fiscal 2015.
FY17 Outlook
Phibro currently expects to generate net sales of $750–$770 million, reflecting 2% annualized growth for fiscal 2017. The current Zacks Consensus Estimate of $764 million for fiscal 2017 falls within the company's guided range.
On the bottom-line front, Phibro expects to deliver adjusted EPS in the range of $1.38–$1.45 in fiscal 2017, displaying an annualized decline of 3% to growth of 1%. The current Zacks Consensus Estimate of $1.62 for fiscal 2017 lies above the company's guided range.
Our Take
Phibro ended fiscal 2016 on a promising note, with its fiscal fourth-quarter bottom line comfortably exceeding the Zacks Consensus Estimate and its revenues expanding in low single digit on a year-over-year basis. However, bottom line deteriorated year over year. Nonetheless, Animal Health remained the key contributing business, delivering positive growth on a year-over-year basis. The company’s strong growth in adjusted EBITDA also encourages us.
In terms of guidance, we are impressed to notice the expansion that management forecasts for gross profit ratio as well as operating margin for the ongoing fiscal 2017. Segment-wise, a persistent decline in Mineral Nutrition segment’s sales is expected.
Zacks Rank & Key Picks
Phibro currently holds a Zacks Rank #4 (Sell). Some better-ranked medical stocks are NuVasive, Inc , GW Pharmaceuticals plc and Quidel Corp. (QDEL - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
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Phibro Animal Health (PAHC) Q4 Earnings Top, Decline Y/Y
Phibro Animal Health Corporation(PAHC - Free Report) reported adjusted earnings per share (EPS) of 40 cents in the fourth quarter of fiscal 2016, reflecting a decline of 9.1% from the year-ago quarter. Adjusted EPS however surpassed the Zacks Consensus Estimate by 5.3%.
Per management, increased depreciation expense, interest expense and income taxes accounted for approximately 7 cents of the bottom-line decline, which was partially mitigated by adjusted EBITDA that contributed growth of 3 cents.
Including one-time items, the company reported EPS of 38 cents, reflecting an increase of 46.2% from the year-ago quarter’s comparable figure of 26 cents.
For full fiscal 2016, the company delivered adjusted EPS of $1.61, exhibiting a decline of 6% year over year. The full fiscal adjusted EPS beat the Zacks Consensus Estimate by a couple of cents. However, excluding the 2015 vaccine milestone licensing revenue and income, adjusted EPS increased 6%.
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Net Sales
In the reported quarter, Phibro’s net sales improved 2.3% year over year to $189.2 million. The top-line improvement was driven by sales growth in Animal Health and Performance Products segments, which was partially offset by declines observed in Mineral Nutrition sales.
For fiscal 2016, the company generated net sales of $751.5 million, reflecting a meagre year-over-year improvement of 0.4%. The top-line improvement was driven by sales growth observed in the Animal Health segment, which was again partially neutralized by declines in Mineral Nutrition and Performance Products segments’ sales.
Sales by Segments
Net sales at the Animal Health segment increased 7% to $126.2 million in the reported quarter on the back of volume increases observed across all product groups of this segment. Sales from Vaccines increased 29%, including results from the MVP Laboratories’ acquisition, partly offset by decline in certain vaccine sales. Nutritional specialty products sales grew 14%, owing to volume growth in the U.S. for Phibro’s dairy and poultry products. On the other hand, sales at MFAs and Other (the biggest section of this segment) rose 3% on volume growth in Brazil and other international markets, partially offset by declines in U.S. sales of certain MFAs.
Net sales at the Mineral Nutrition segment slumped 9% to $50.3 million, owing to lower average selling prices on account of declines observed in underlying raw material commodity price. Slightly reduced volumes on seasonal variations in demand for trace mineral products also contributed to this segment’s deterioration.
Net sales at the Performance Products segment increased 6% to $12.7 million on higher volumes of copper-based and industrial chemical products. However, lower average selling prices of copper-based products partially neutralized this growth.
Operational Update
Phibro’s adjusted gross profit increased 1.6% year over year (excluding acquisition-related cost of goods sold and acquisition-related amortization) to $61.8 million. However, the adjusted gross margin dropped 20 basis points (bps) to 32.7%.
Adjusted selling, general and administrative expenses increased 1.3% to $38.8 million. Adjusted operating margin was almost flat year over year at 12.2% in the quarter.
Financial Update
At the end of fiscal 2016, Phibro generated $26.6 million in cash flow from operations compared with the year-ago figure of $21.9 million. Capital expenditure amounted to $7.7 million in the quarter, highlighting a 10% increase from $7 million incurred in fiscal 2015.
FY17 Outlook
Phibro currently expects to generate net sales of $750–$770 million, reflecting 2% annualized growth for fiscal 2017. The current Zacks Consensus Estimate of $764 million for fiscal 2017 falls within the company's guided range.
On the bottom-line front, Phibro expects to deliver adjusted EPS in the range of $1.38–$1.45 in fiscal 2017, displaying an annualized decline of 3% to growth of 1%. The current Zacks Consensus Estimate of $1.62 for fiscal 2017 lies above the company's guided range.
Our Take
Phibro ended fiscal 2016 on a promising note, with its fiscal fourth-quarter bottom line comfortably exceeding the Zacks Consensus Estimate and its revenues expanding in low single digit on a year-over-year basis. However, bottom line deteriorated year over year. Nonetheless, Animal Health remained the key contributing business, delivering positive growth on a year-over-year basis. The company’s strong growth in adjusted EBITDA also encourages us.
In terms of guidance, we are impressed to notice the expansion that management forecasts for gross profit ratio as well as operating margin for the ongoing fiscal 2017. Segment-wise, a persistent decline in Mineral Nutrition segment’s sales is expected.
Zacks Rank & Key Picks
Phibro currently holds a Zacks Rank #4 (Sell). Some better-ranked medical stocks are NuVasive, Inc , GW Pharmaceuticals plc and Quidel Corp. (QDEL - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>