Phibro Animal Health Corporation’s ( PAHC Quick Quote PAHC - Free Report) business suffers from an increase in raw material costs and freight costs. Unfavorable currency movement can affect Phibro’s revenues. Moreover, headwinds such as a tough competitive scenario continue to pose threats. The stock currently carries a Zacks Rank #4 (Sell).
Over the past year, Phibro has underperformed its
industry. The stock has lost 31.1% compared with the industry’s 22.6% fall.
During the third quarter of fiscal 2022, the bottom line fell short of the company’s projections due to COVID-related challenges with a key supplier that led to delayed sales and costlier shipments, as well as the lost portion of the company’s indirect sales to Russia due to the ongoing conflict. Phirbo noted that the Russian conflict with Ukraine and the lingering impact of COVID-19 in some markets where it competes, specifically the Asia Pacific, are driving higher-than-anticipated inflation and could result in broader economic impacts and security concerns, which can adversely impact the company’s business in the near future.
The increase in raw material costs and freight costs continues to pose challenges for the company. Contraction of both margins does not bode well either. Phibro’s fiscal third-quarter gross margin contracted 276 basis points (bps) to 71.6% on a 17.8% rise in the cost of goods sold. Selling, general and administrative expenses in the reported quarter were up 6.9% from the year-ago quarter. Operating profit declined 4.5% year over year and operating margin contracted 148 bps to 8% in the quarter under review.
Phibro faces threats from a substantial number of global and regional competitors with respect to its major products. The company’s competitive position is based principally on its product registrations, customer service and support, breadth of product line, product quality, manufacturing technology, facility location, and product prices.
Phibro is subject to currency risk to the extent that its costs are denominated in currencies other than those in which the company earns revenues. On its fiscal second-quarter earnings call, the company noted that despite witnessing a foreign currency gain, volatility in foreign currency exchange rates continues to impact its performance.
On a positive note, Phibro exited third-quarter fiscal 2022 on a mixed note with better-than-expected revenues while adjusted EPS missed the mark. On a positive note, the year-over-year increase in the top line was primarily driven by continued demand for the company’s products globally. Robust performance by the Animal Health, Mineral Health and Performance Products segments buoys optimism. During the quarter, Phirbo acquired a business that provides products and services primarily to the sugar-based ethanol industry in Brazil. This acquisition is expected to replicate the success it had experienced in the U.S. industry.
The company has raised its revenue guidance for fiscal 2022 on improving business trends.
In the third quarter of fiscal 2022, Phibro registered 21% growth in vaccine net sales, hugely driven by increased international volumes. Further, Phirbo acquired a business that provides products and services primarily to the sugar-based ethanol industry in Brazil. This acquisition is expected to replicate the success it had experienced in the U.S. industry.
A few better-ranked stocks in the broader medical space are
AMN Healthcare Services, Inc. ( AMN Quick Quote AMN - Free Report) , Medpace Holdings, Inc. ( MEDP Quick Quote MEDP - Free Report) and UnitedHealth Group Incorporated ( UNH Quick Quote UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 4.4% against the industry’s 64.1% fall.
Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 19.2% compared with 17% industry growth in the said period.