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Phibro (PAHC) Q1 Earnings Surpass Estimates, Margins Up

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Phibro Animal Health Corporation (PAHC - Free Report) reported adjusted earnings per share (EPS) of 27 cents in the first quarter of fiscal 2021, reflecting a 42.1% uptick from the year-ago EPS of 19 cents. The figure exceeded the Zacks Consensus Estimate by 28.6%.

Meanwhile, without adjustments, GAAP EPS for the first quarter was 30 cents, up by a stupendous 400% from the year-ago count of 6 cents.

Net Sales

In the quarter under review, net sales totaled $195.2 million, up 2.9% year over year primarily due to improved sales and profitability in the core Animal Health segment. Continued strength in customer demand for Nutritional Specialties and Vaccines offerings also boosted the top line.

Segmental Sales Break-Up

During fiscal first quarter, Animal Health net sales improved 5.3% to $128.4 million. Within this segment, sales of medicated feed additives (MFAs) and other were $78.7 million, reflecting a 4.9% year-over-year surge. The improvement in MFAs resulted from robust international demand, mainly for poultry products, along with favorable timing of certain customer orders.

Within Animal Health, nutritional specialty product sales rose 7.2% to $32.6 million, primarily due to international growth in dairy products. However, per the company, domestic sales were comparable to the prior year.

Apart from this, net vaccine sales totaled $17.1 million, showing an increase of 4.3% year over year on higher international demand for poultry vaccines.

Net sales at the Mineral Nutrition segment fell 2.3% year over year to $51.4 million owing to lower average selling prices, which offset the overall unit volume growth.

Net sales at the Performance Products segment rose 1.3% to $15.4 million owing to higher sales of personal care product ingredients. However, this was partially offset by lower sales of copper-based products.

Margins

Phibro’s first-quarter gross profit improved 11.3% year over year to $64.1 million. Gross margin expanded 247 basis points (bps) to 32.8%.

Selling, general and administrative expenses in the reported quarter were $48.4 million, up 1.9% from the year-ago quarter.

Adjusted operating profit rose 55.4% year over year to $15.7 million and adjusted operating margin expanded 272 bps to 8% in the quarter under review.

Financial Update

The company exited the first quarter of fiscal 2021 with cash and short-term investments on hand of $92 million compared with $91 million at the end of fiscal 2020.

Net cash provided by operating activities at the end of the first quarter of fiscal 2021 was $1.7 million compared with net cash used by operating activities of $3.6 million a year ago.

Cumulative capital expenditure amounted to $7.4 million at the end of first quarter of fiscal 2021, reflecting a decrease from the year-ago $7.6 million.

Outlook

Despite pandemic-led business disruptions across the globe, Phibro has provided its financial guidance for the second quarter of fiscal 2021, boosted by the improving business trends.

The company projects net sales for the second quarter of fiscal 2021 to be around $205 million, which is below the year-ago reported sales of $214 million.

Net income for the second quarter of fiscal 2021 is projected to be $9 million, below the year-ago reported net income of $11.9 million.

Adjusted EPS is projected to be 28 cents. The Zacks Consensus Estimate for the metric is in line with the company’s expectations.

Further, GAAP EPS for second quarter of fiscal 2021 is anticipated to be 23 cents, below the year-ago reported GAAP EPS of 29 cents.

Our Take

Phibro exited first-quarter fiscal 2021 with better-than-expected earnings. Strength in Animal Health and Performance Products segments boosted the overall top line during the reported quarter. Robust performance by the nutritional specialty product sales and net vaccine sales is impressive. A strong international performance by the company amid the ongoing pandemic-led challenging business environment looks encouraging. Ongoing business recovery and strong customer demand bode well for the company.

Expansion of both margins is encouraging as well. The company has provided financial guidance for the second quarter of fiscal 2021 despite pandemic-led business challenges, raising optimism.

On the flip side, dismal performance of the Mineral Nutrition arm is discouraging. Also, lower sales of copper-based products in the Performance Products business raises concerns.

Zacks Rank and Key Picks

Phibro currently carries a Zacks Rank #3 (Hold).

Some other better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries 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 third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently carries a Zacks Rank #2.

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