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Phibro (PAHC) Q2 Earnings Surpass Estimates, Margins Up

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Phibro Animal Health Corporation’s (PAHC - Free Report) adjusted earnings per share (EPS) of 34 cents in the second quarter of fiscal 2021 were in line with the year-ago adjusted figure. The figure however exceeded the Zacks Consensus Estimate by 25.9%.

Meanwhile, without adjustments, GAAP EPS for the second quarter was 32 cents, a significant 10.3% rise from the year-ago count.

Net Sales

In the quarter under review, net sales totaled $206.1 million, down 3.7% year over year, primarily due to reduced sales and profitability in the core Animal Health and Mineral Nutrition segment. Vaccine sales declined owing to lower international demand. However, decline of the top line is partially offset by improvement in the Performance Products segment.

Segmental Sales Break-Up

During the fiscal second quarter, Animal Health net sales declined 5.2% to $136.2 million. Within this segment, sales of medicated feed additives (MFAs) and other were $81.6 million, reflecting an 11.3% year-over-year plunge. The decline was due to lower international demand, primarily concentrated in China and Latin America, partially offset by favorable domestic customer order patterns.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

 

Within Animal Health, nutritional specialty product sales rose 9.9% to $36.4 million, primarily due to domestic and international growth in dairy products.

Apart from this, net vaccine sales totaled $18.3 million, showing a decline of 2.1% year over year due to lower international volume and reduced demand during the quarter.

Net sales at the Mineral Nutrition segment fell 2.7% year over year to $54.2 million owing to lower average selling prices, which offset the overall unit volume growth.

Net sales at the Performance Products segment rose 8.2% to $15.8 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 second-quarter gross profit declined 1.3% year over year to $68.2 million. Gross margin expanded 80 basis points (bps) to 33%.

Selling, general and administrative expenses in the reported quarter were $48.4 million, down 2.2% from the year-ago quarter.

Operating profit rose 1.02% year over year to $19.8 million and operating margin expanded 45 bps to 9.6% in the quarter under review.

Financial Update

The company exited the second quarter of fiscal 2021 with cash and short-term investments in hand of $96 million compared with $92 million at the end of the first quarter of fiscal 2021.

Year to date, cumulative net cash provided by operating activities at the end of the second quarter of fiscal 2021 was $28.6 million compared with net cash used by operating activities of $28.5 million a year ago.

Cumulative capital expenditure amounted to $14.7 million at the end of the second quarter of fiscal 2021, reflecting a decrease from the year-ago $16.1 million.

Outlook

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

The company projects net sales for the third quarter of fiscal 2021 in range of $205-$208 million, suggesting a drop from the year-ago $211 million.

Adjusted EPS is projected in band of 30-33 cents. The Zacks Consensus Estimate for the metric is pegged at 32 cents.

Our Take

Phibro exited second-quarter fiscal 2021 with better-than-expected earnings results. Although decline in Animal Health and Performance Products segments plunged the overall top line during the reported quarter, robust net vaccine sales are 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 a strong financial guidance for the third quarter of fiscal 2021 raising optimism.

Zacks Rank and Other Key Picks

Currently, Phibro carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space that have already announced their quarterly results are NextGen Healthcare, Inc. (NXGN - Free Report) , Abbott Laboratories (ABT - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) . While AngioDynamics sports a Zacks Rank of 1 (Strong Buy), both Abbott and NextGen Healthcare carry a Zacks Rank #2. You can see the complete list of Zacks #1 Rank stocks here.

NextGen Healthcare reported third-quarter fiscal 2021 adjusted EPS of 26 cents, beating the Zacks Consensus Estimate by 8.3%. Revenues of $141.7 million surpassed the consensus mark by 0.6%.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny against the Zacks Consensus Estimate of a loss per share of 2 cents. Revenues of $72.8 million beat the consensus mark by 8%.

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