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Phirbo (PAHC) Nutritional Specialty Aids Growth, Low ASP Ails

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On Jan 11, 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 provides it ample scope to take advantage of global growth opportunities. However, adverse currency movements remain a major concern for this Zacks Rank #3 (Hold) company.

In the first quarter of fiscal 2021, strength in Animal Health and Performance Products arms boosted the overall top line for Phirbo. Robust nutritional specialty product and net vaccine sales were impressive. Strong international performance amid the pandemic-led challenging business climate looks impressive. Ongoing business recovery due to strong customer demand looks encouraging. Expansion of both margins raise optimism.

More specifically, during the fiscal first quarter, Animal Health segment’s nutritional specialty product sales rose 7.2% primarily due to international growth in dairy products. Apart from this, net vaccine sales reflected an increase of 4.3% year over year on higher international demand for poultry vaccines. Further, the MFAs and other product sales rose 4.9% year over year due to robust international demand, mainly for poultry products, along with favorable timing of certain customer orders. The overall segment saw an improvement of 5.3% in year-over-year revenues.

Currently, the company is focused on expanding its footprint in the poultry, swine and cattle industries in both domestic and international markets. The complementary nature of its animal health and mineral nutrition portfolio provides Phibro with unique cross-selling opportunities that can help it reach out to new customers or strengthen relationships with existing ones. We believe such a diverse portfolio will allow the company to comfortably address the distinct growing conditions of livestock in different regions of the world.

In the fiscal first quarter, Phirbo’s net vaccine sales increased 4.3% year over year on higher international volume. For the full year, vaccine sales grew 10% primarily on strong international demand for poultry vaccines and increasing market penetration. Further, the company, during its fiscal first-quarter 2021 earnings call confirmed that over the past 12 months it had 15 significant vaccine registrations approved.

On the flip side, this leading global diversified animal health and mineral nutrition company has been underperforming its industry for the past six months. The stock has lost 17.5% against the industry’s 17.9% rise.

Phibro recorded dismal performance in its Mineral Nutrition arm due to lower average selling prices (ASP) amid the pandemic scenario. Also, lower sales of copper-based products in the Performance Products business raises concerns. Foreign exchange fluctuations and a stiff competitive landscape are other headwinds.

The industries that the company caters to (especially swine and cattle customers) also faced issues like lack of processing availability and sudden drop in demand. The company had to close down many of its production facilities or operate at different rates due to the pandemic.

Key Picks

Some better-ranked stocks from the broader medical space are Amedisys (AMED - Free Report) , IDEXX Laboratories (IDXX - Free Report) and Patterson Companies (PDCO - Free Report) .

Amedisys’ long-term earnings growth rate is estimated at 14.8%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.

Patterson’s long-term earnings growth rate is estimated at 11.1%. The company presently carries a Zacks Rank #2.

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