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Phibro (PAHC) Q4 Earnings Fall Short of Estimates, Margins Up

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Phibro Animal Health Corporation (PAHC - Free Report) reported adjusted earnings per share (EPS) of 17 cents in the fourth quarter of fiscal 2020, reflecting a 48.5% fall from the year-ago 33 cents. The figure also lagged the Zacks Consensus Estimate by 22.7%.

Full-year adjusted EPS was $1.08, reflecting a 29.4% decrease from the year-earlier $1.53. The metric again fell short of the Zacks Consensus Estimate by 2.7%.

Meanwhile, without adjustments, GAAP EPS for the fourth quarter was 14 cents, down 36.4% from the year-ago count.

Full-year GAAP EPS was 83 cents, reflecting a 38.5% fall from the year-earlier $1.35.

Net Sales

In the quarter under review, net sales totaled $185.9 million, down 8.8% year over year primarily due to pandemic-led challenges. The industries that the company caters to (especially swine and cattle customers) also faced issues like lack of processing availability and sudden drops in demand. However, this was partially offset by progress made in Nutritional Specialties and Vaccines offerings.

Full-year revenues were $800.4 million, reflecting a 3.3% drop from the year-ago period.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

 

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

Phibro Animal Health Corporation price-consensus-eps-surprise-chart | Phibro Animal Health Corporation Quote

Segmental Sales Break-Up

During the fourth quarter, Animal Health net sales declined 7.3% to $122.4 million. Within this segment, sales of medicated feed additives (MFAs) and other were $72.6 million, reflecting a 15.9% year-over-year decline. The decline in MFAs resulted from lower sales volume in China, South America and other international regions. The drop in volumes in China was driven by continued effects of African Swine Fever and regulatory changes effective Jan 1, 2020.

Within Animal Health, nutritional specialty product sales rose 8.7% to $31.1 million, primarily due to the acquisition of Osprey Biotechnics.

Apart from this, net vaccine sales totaled $18.6 million, showing an increase of 8.1% year over year on higher international volume.

Net sales at the Mineral Nutrition segment fell 10.9% year over year to $49.9 million owing to lower average selling prices and reduced overall unit volumes.

Net sales at the Performance Products segment fell 14.5% to $13.6 million owing to lower volume of copper-based and industrial chemical products.

Margins

Phibro’s fourth-quarter gross profit declined 7.2% year over year to $60.6 million. However, gross margin expanded 57 basis points (bps) to 32.6%.

Selling, general and administrative expenses in the reported quarter were $42.4 million, down 20.3% from the year-ago quarter.

Adjusted operating profit rose 50.4% year over year to $18.2 million and adjusted operating margin expanded 386 bps to 9.8% in the quarter under review.

Financial Update

The company exited fiscal 2020 with cash and short-term investments on hand of $91 million compared with $82 million at the end of fiscal 2019.

Cumulative net cash provided by operating activities at the end of fiscal 2020 was $59.3 million compared with $47.2 million at the end of fiscal 2019.

Cumulative capital expenditure amounted to $34 million at the end of fiscal 2020, reflecting an increase from the year-ago $29.9 million.

Outlook

Despite the pandemic-led business disruptions across the globe, Phibro has provided its financial guidance for the first quarter of fiscal 2021.

The company projects net sales at around $190 million, suggesting almost no movement from the year-ago figure. Net income is projected within $5-$6 million, indicating an increase of $2.5-$3.5 million from the year-ago figure.

Adjusted EPS is projected at 18-20 cents, indicating a loss of a penny to a gain of a penny from the year-ago figure. GAAP EPS is anticipated within 13-15 cents, reflecting an increase of 7-9 cents year over year.

Our Take

Phibro exited fourth-quarter fiscal 2020 with lower-than-expected earnings. The dismal overall performance is discouraging. The international performance of the company’s key operating segment, Animal Health, has been discouraging as well. The other two reporting segments also put up a disappointing show, raising apprehensions about the company. The pandemic-led business disruptions faced by the company in the quarter like the lack of processing availability and sudden declines in demand are also deterring.

However, the Animal Health segment’s dismal results were partially offset by nutritional specialty product sales and net vaccine sales. The contribution to nutritional specialty product sales from the acquisition of Osprey Biotechnics bodes well. Expansion of both margins is encouraging as well. The company has provided financial guidance for the first quarter of fiscal 2020 despite pandemic-led business challenges, raising optimism.

Zacks Rank and Stocks to Consider

Phibro currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Hologic, Inc. (HOLX - Free Report) .

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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