Phibro Animal Health Corporation ( PAHC Quick Quote PAHC - Free Report) has been gaining on robust growth in its Performance Products arm. Better-than-expected results for the third quarter of fiscal 2021 and a bullish fourth-quarter 2021 outlook provided by the company buoy optimism. However, downsides may result from a stiff competitive landscape. Also, contraction of both margins is worrying.
Over the past six months, this Zacks Rank #2 (Buy) stock has gained 49.4% versus 5.9% growth of the
industry and 14.7% rise of the S&P 500.
The renowned global diversified animal health and mineral nutrition company has a market capitalization of $1.17 billion. The company projects 10.6% growth for the next five years and expects to maintain strength in its business arms. Phibro surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 8.70%.
Let’s delve deeper.
Strong Q3 Results: 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 top-line growth. Growth in international market of dairy products amid the post-pandemic recovery is impressive. The year-over-year growth in the Mineral Nutrition arm is encouraging as well. The outlook for fourth-quarter fiscal 2021 provided by the company is indicative of this bullish trend. Diversified Product Portfolio: Phibro is focused on expanding its footprint in the poultry, swine and cattle industries, in both domestic and international markets. Phibro is working actively to expand the cattle markets in the United States, specifically in Mexico and Brazil, as well as in Canada, Australia and South Africa. Also, the company recently signed an agreement with Virbac to distribute its generic DRAXXIN in the Canadian market. Phibro is also evaluating potential opportunities in the oral space for cats and dogs, a space with an estimated addressable market of more than $2 billion. Potential in Emerging Markets: In the third quarter of fiscal 2021, Phibro registered growth in nutritional specialties driven by strong international growth in dairy products. Moreover, vaccine sales were primarily driven by growth in APAC and North America regions.
Currently, the company is expanding its dairy business in the markets of Australia, Brazil and Mexico. We believe given the turmoil that is currently prevailing in the economies of Russia, Greece, Brazil and China, Phibro has performed quite well of late and bears the potential to maintain the healthy performance, going ahead.
However, downsides might result from Phibro’s operation in a highly competitive industry, which includes both global and regional competitors. Moreover, consolidation continues to rise in the animal health market, which might work in favor of Phibro’s competitors.
Further, during the third quarter of fiscal 2021, the company witnessed decline in vaccine sales due to challenging economic conditions in Eastern Europe. Further, contraction of both margins does not bode well.
Phibro has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings per share (EPS) has moved 6.8% north to $1.26.
The Zacks Consensus Estimate for fourth-quarter fiscal 2021 EPS is pegged at 32 cents, suggesting a rise of 88.2% from the year-ago reported number.
Other Key Picks
A few similar-ranked stocks from the broader medical space are
National Vision Holdings, Inc. ( EYE Quick Quote EYE - Free Report) , Boston Scientific Corporation ( BSX Quick Quote BSX - Free Report) and Envista Holdings Corporation ( NVST Quick Quote NVST - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
National Vision has a projected long-term earnings growth rate of 23%.
Boston Scientific has a projected long-term earnings growth rate of 9%.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
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