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Phibro (PAHC) Q3 Earnings Beat Estimates, Margins Decline

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Phibro Animal Health Corporation’s (PAHC - Free Report) adjusted earnings per share (EPS) of 34 cents in the third quarter of fiscal 2021 reflected a decline of 10.5% from the year-ago adjusted figure. The metric however surpassed the Zacks Consensus Estimate by 3%.

Meanwhile, without adjustments, GAAP EPS for the third quarter was 30 cents, showing a 9.1% decline from the year-ago count.

Net Sales

In the quarter under review, net sales totaled $211.7 million compared to the year-ago $210.7 million. The growth is primarily due to improvement in the Performance Products and Mineral Nutrition segments, partially offset by reduced sales and profitability in the core Animal Health. Vaccine sales also dropped owing to lower international demand.

Segmental Sales Break-Up

During the fiscal third quarter, Animal Health net sales declined 3% to $134.4 million. Within this segment, sales of medicated feed additives (MFAs) and other were $78.5 million, reflecting a 5% year-over-year decrease due to lower international demand as well as unfavorable timing of certain domestic customer orders.

Within Animal Health, nutritional specialty product sales rose 7% to $37 million, primarily on international volume growth in dairy products.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

 

Apart from this, net vaccine sales totaled $18.9 million, showing a decline of 13% year over year due to challenging economic conditions in Eastern Europe, which was more than offset by higher domestic volumes as well as increased demand in the Asia-Pacific region.

Net sales at the Mineral Nutrition segment rose 3% year over year to $58.2 million on higher average selling prices.

Net sales at the Performance Products segment rose 23% to $19.2 million driven by strong demand for copper-based products along with favorable product pricing related to underlying raw material costs.

Margins

Phibro’s third-quarter gross profit declined 0.6% year over year to $69.1 million. Gross margin contracted 34 basis points (bps) to 32.6%.

Selling, general and administrative expenses in the reported quarter were $49 million, up 1.7% from the year-ago quarter.

Operating profit fell 5.6% year over year to $20.1 million and operating margin contracted 61 bps to 9.5% in the quarter under review.

Financial Update

The company exited the third quarter of fiscal 2021 with cash and short-term investments in hand of $93 million compared with $96 million at the end of the second quarter of fiscal 2021.

Year to date, cumulative net cash provided by operating activities at the end of the third quarter of fiscal 2021 was $45.2 million compared with net cash provided by operating activities of $55.5 million a year ago.

Cumulative capital expenditure amounted to $22.2 million at the end of the third quarter of fiscal 2021, reflecting a decrease from the year-ago $24 million.

Outlook

Despite pandemic-led business disruptions across the globe, Phibro has provided the fourth-quarter fiscal and fiscal 2021 financial guidance on improving business trends.

The company projects net sales for the fourth quarter of fiscal 2021 in range of $213-$217 million, suggesting an increase from the year-ago $185.9 million.

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

For fiscal 2021, the company projects net sales in range of $826.1-$830.1 million. The Zacks Consensus Estimate for the metric is pegged at $801.5 million.

Adjusted EPS for fiscal 2021 is projected in the band of $1.25-$1.27. The Zacks Consensus Estimate for the metric is pegged at $1.18.

Our Take

Phibro exited third-quarter fiscal 2021 with better-than-expected earnings results. Solid growth in the Performance Products segment driven by strong demand for copper-based products drove overall top-line growth. The year-over-year growth in the Mineral Nutrition arm is encouraging as well. The ongoing business recovery and strong customer demand bode well. The company has provided financial guidance for fourth quarter fiscal 2021, calling for year-over-year revenue growth.

On the flip side, the year-over-year decline in the Animal Health segment is discouraging. The decline in vaccine sales due to challenging economic conditions in Eastern Europe is worrying as well. Contraction of both margins does not bode well either.

Zacks Rank and Key Picks

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

A few better-ranked stocks in the broader medical space are Boston Scientific Corporation (BSX - Free Report) , Illumina, Inc. (ILMN - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) .

Boston Scientific reported first-quarter 2021 adjusted EPS of 37 cents, beating the Zacks Consensus Estimate by 23.3%. Net revenues of $2.75 billion outpaced the consensus estimate by 5.3%. It currently carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Illumina reported first-quarter 2021 adjusted EPS of $1.89, beating the Zacks Consensus Estimate by 38.9%. Revenues of $1.09 billion outpaced the consensus estimate of $1.08 billion. It currently carries Zacks Rank #2.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%. It currently carries Zacks Rank #2.

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