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Phibro (PAHC) Hurt by Adverse Pricing in Mineral Nutrition Arm

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Recently, we issued an updated research report on Phibro Animal Health Corporation (PAHC - Free Report) . Phibro Animal’s existing operations, and established sales, marketing and distribution network in more than 65 countries provide it ample scope to take advantage of global growth opportunities. However, adverse currency movements remain a major concern for this company.

This Zacks Rank #5 (Strong Sell) company has underperformed its industry for the past six months. The stock has lost 23.4% against the industry’s 12.1% growth. Dismal show by the Mineral Nutrition arm in the first quarter of fiscal 2021 due to lower average selling prices is discouraging. Although the segment registered volume growth, this was more than offset by lower average selling prices.

Lower sales of the Performance Products arm’s copper-based products raise concerns. Foreign exchange fluctuations and stiff competition are other headwinds. Given the uncertainty of the future course of the pandemic and the ongoing difficult conditions in the industry, the company was unable to provide guidance for the full fiscal.

Phibro is also facing competition from generic alternatives of some of its products. The company depends primarily on trade secrets to provide management with competitive advantages for many of its products.

The protection afforded is limited by the availability of new competitive products or generic versions of existing products that can compete with Phibro’s products. Also, a persistently weak dairy industry within the Animal Heath arm is disappointing.

On a positive note, strength in Animal Health and Performance Products arms boosted the overall top line in the quarter. Robust sales of nutritional specialty product and net vaccine are impressive. Phibro’s strong international performance amid the pandemic-led challenging business climate looks encouraging.

Ongoing business recovery looks encouraging, backed by strong customer demand. Expansion of both margins and provision of guidance raise optimism. A strong balance sheet position is a plus.

Key Picks

Some better-ranked stocks from the broader medical space are ResMed Inc. (RMD - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher’s long-term earnings growth rate is estimated at 18%. It currently carries a Zacks Rank #2.

Align Technology’s long-term earnings growth rate is estimated at 18.3%. It currently carries a Zacks Rank #2.

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