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Phibro (PAHC) Strong on Animal Health Arm, Dull MFA Ails

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On Jan 8, we issued an updated research report on Phibro Animal Health Corporation (PAHC - Free Report) . The company has a Zacks Rank #3 (Hold).

This is a New Jersey-based leading globally diversified animal health and mineral nutrition company. Over the last 30 days, it has been trading above the broader industry. The stock has gained 6.5% compared with the 5.2% growth of the broader industry.

Notably, Phibro ended the second quarter of fiscal 2017 on a mixed note with the bottom line exceeding the Zacks Consensus Estimate and revenues declining marginally on a year-over-year basis.

 

 

On a positive note, Animal Health has continued to remain a key contributor segment-wise, delivering growth over the last few quarters. Per Phibro, its animal health products are excellent in preventing, controlling and treating diseases in animals as well as increasing nutrition to improve health. We believe, a diverse product portfolio will allow the company to address the distinct growing conditions of livestock in different regions of the world.

Phibro has extended its reach beyond the United States to enter Brazil and other countries in South America, China, India and Asia Pacific besides Russia and Africa. This we feel will help the company counter competition.

The company continues to invest in the Far East Asia wherein poultry and dairy industries are expected to grow exponentially. The company expands its dairy business in the markets of Australia, Brazil and Mexico. We believe that despite the economic turmoil in Russia, Greece, Brazil and China, Phibro has performed quite well and has potential to maintain the momentum.

On the flip side, Medicated feed additives (MFA) business was weak in the United States in the last quarter. Approximately, $4.2 million of that business decline was due to reduced sales of medically important antimicrobials, primarily driven by the change in consumer preferences and the less use of certain antimicrobials in the market. Additionally, an unfavorable timing of certain customer orders hampered the business.

Also, a persistent decline in Mineral Nutrition segment sales is likely to be a drag on business. Customer consolidation can also affect Phibro’s revenues. Plus, a negative currency movement and a tough competitive scenario continue to pose as other headwinds.

Key Picks

A few better-ranked stocks in the broader medical space are Bio-Rad Laboratories Inc. (BIO - Free Report) , Centene Corporation (CNC - Free Report) and ABIOMED Inc. . While Bio-Rad and Centene sport a Zacks Rank #1 (Strong Buy), ABIOMED carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank Stocks Here.

Bio-Rad’s long-term growth rate is 25%. The stock has rallied 11.3%, above the industry’s 6.9% gain over the last six months.

Centene’s long-term growth rate is 14%. The stock has surged 29.3%, outperforming the industry’s 20.6% increase in the last six months.

ABIOMED’s long-term growth rate is an impressive 31.5%. The stock has also soared 47.2%, much above the industry’s rise of 6.7% in the last six months.

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