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Phibro (PAHC) Q4 Earnings Match Estimates, Margins Down

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Phibro Animal Health Corporation’s (PAHC - Free Report) adjusted earnings per share (EPS) of 32 cents in the fourth quarter of fiscal 2021 reflected a rise of 88.2% from the year-ago adjusted figure. The metric was in line with the Zacks Consensus Estimate of 32 cents

Meanwhile, without adjustments, GAAP EPS for the fourth quarter was 42 cents, showing 200% surge from the year-ago count.

For fiscal 2021, adjusted EPS came in at $1.34, up 61% from the year-ago figure.

Net Sales

In the quarter under review, net sales totaled $220.3 million compared with the year-ago net sales of $185.9 million. The increase is primarily due to improvement in the Animal Health, Performance Products and Mineral Nutrition segments.

For 2021, net sales totaled $833.4 million, up 4.1% from the year-ago tally.

Segmental Sales Break-Up

During the fiscal fourth quarter, Animal Health net sales increased 20% to $146.7 million. Within this segment, sales of medicated feed additives (MFAs) and others were $18.6 million, reflecting 26% year-over-year growth, driven by higher domestic and international demand, primarily due to a level of recovery from the global pandemic. Within Animal Health, nutritional specialty product sales rose 18% to $36.8 million, primarily on international volume growth in dairy products.

Apart from this, net vaccine sales totaled $18.7 million, showing a rise of 1% year over year as domestic volume growth and increased demand in the Asia Pacific region were partially offset by challenging economic conditions in Eastern Europe.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

Net sales at the Mineral Nutrition segment rose 14% year over year to $56.8 million on higher average selling prices.

Net sales at the Performance Products segment rose 23% to $16.7 million, driven by strong demand for copper-based products along with favorable product pricing related to underlying raw material costs.

Margins

Phibro’s fourth-quarter gross profit rose 15.2% year over year to $69.8 million. Gross margin contracted 91 basis points (bps) to 31.7%.

Selling, general and administrative expenses in the reported quarter were $50.7 million, up 19.6% from the year-ago quarter.

Operating profit rose 4.9% year over year to $19.1 million and operating margin contracted 112 bps to 8.7% in the quarter under review.

Financial Update

The company exited the fourth quarter of fiscal 2021 with cash and short-term investments in hand of $93 million compared with $91 million at the end of fourth-quarter 2020.

Year to date, cumulative net cash provided by operating activities at the end of the fourth quarter of fiscal 2021 was $48.3 million compared with $59.3 million a year ago.

Cumulative capital expenditure amounted to $29.3 million at the end of the fourth quarter of fiscal 2021, reflecting a decrease from the year-ago $34 million.

Outlook

Phibro has provided the fiscal 2022 financial guidance on improving business trends.

The company projects net sales for the fiscal 2022 in range of $840-$870 million.

Adjusted EPS is projected in band of $1.25-$1.32. The Zacks Consensus Estimate for the metric is pegged at $1.33.

Our Take

Phibro’s fourth-quarter fiscal 2021 earnings were in-line with estimates. Solid growth in the Performance Products segment, driven by strong demand for copper-based products, drove overall top-line growth. Growth in MFAs sales, driven by higher domestic and international demand, primarily due to a level of recovery from the global pandemic, is encouraging. 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 its financial guidance for fiscal 2022 on improving business trends, which is indicative of this bullish trend to continue.

On the flip side, decrease in vaccine sales due to challenging economic conditions in Eastern Europe is worrying. Escalating expenses and contraction of both margins does not bode well either.

Zacks Rank and Key Picks

The company currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Henry Schein, Inc. (HSIC - Free Report) .

Encompass Health, carrying a Zacks Rank # 1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical, carrying a Zacks Rank of 2 (Buy) reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

Henry Schein, carrying a Zacks Rank of 2 reported second-quarter 2021 adjusted EPS of $1.11, which surpassed the Zacks Consensus Estimate by 16.8%. Revenues of $2.97 billion surpassed the Zacks Consensus Estimate by 2.7%.