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Phibro (PAHC) Up 7.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Phibro Animal Health (PAHC - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Phibro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Phibro Q3 Earnings Lag Estimates, 2022 Revenue View Up

 

Phibro Animal Health’s adjusted earnings per share of 33 cents for the third quarter of fiscal 2022 reflected a 2.9% drop from the year-ago adjusted figure. The metric also lagged the Zacks Consensus Estimate by 8.3%.

Meanwhile, without adjustments, GAAP earnings per share for the fiscal third quarter was 44 cents, up 0.4% from the year-ago figure.

Net Sales

In the quarter under review, net sales totaled $239.6 million, up 13.2% from the year-ago quarter. The figure exceeded the Zacks Consensus Estimate by 3.5%.

During the fiscal third quarter, Animal Health net sales increased 11% to $148.6 million. Within this segment, sales of medicated feed additives (MFAs) and others were $84.3 million, reflecting 7% year-over-year growth, driven by higher sales of processing aids used to improve production efficiency in the ethanol fermentation industry.

Within Animal Health, nutritional specialty product sales rose 12% to $41.4 million, primarily banking on higher demand for dairy and microbial products, and increased revenues from the companion animal product.

Apart from this, net vaccine sales totaled $22.9 million, showing a rise of 21% year over year on increased domestic and international volumes.

Net sales at the Mineral Nutrition segment rose 19% year over year to $69 million on the increase in average selling prices of trace minerals, linked to the movement of the underlying raw material costs.

Net sales at the Performance Products segment rose 15% to $22 million. This growth was driven by higher volumes of ingredients for personal care products and higher volumes and average selling prices of copper-based products.

Margins

Phibro’s fiscal third-quarter gross profit rose 3.6% year over year to $71.6 million. However, gross margin contracted 276 basis points (bps) to 71.6% on a 17.8% rise in the cost of goods sold to $168 million.

Selling, general and administrative expenses in the reported quarter were $52.4 million, up 6.9% from the year-ago quarter.

Operating profit declined 4.5% year over year to $19.2 million and operating margin contracted 148 bps to 8% in the quarter under review.

Financial Update

The company exited the fiscal third quarter with cash and short-term investments in hand of $93 million compared with $95 million at the end of second-quarter fiscal 2022.

Cumulative net cash used in operating activities at the end of the third quarter was $30.1 million compared with $45.2 million a year ago.

Cumulative capital expenditure amounted to $25.2 million at the end of the third quarter of fiscal 2022, compared with $22.2 million in the year-ago quarter.

Outlook

Phibro has updated its fiscal 2022 financial guidance.

The company raised net sales guidance for fiscal 2022 in the range of $930-$950 million, an improvement from the earlier-provided band of $890-$920 million. The Zacks Consensus Estimate for the metric is pegged at $913.7 million.

The adjusted earnings per share guidance was reiterated in the band of $1.30-$1.39. The Zacks Consensus Estimate for the same is pegged at $1.38.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 5.26% due to these changes.

VGM Scores

Currently, Phibro has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Phibro has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Phibro belongs to the Zacks Medical - Products industry. Another stock from the same industry, ResMed (RMD - Free Report) , has gained 3.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

ResMed reported revenues of $864.5 million in the last reported quarter, representing a year-over-year change of +12.5%. EPS of $1.32 for the same period compares with $1.30 a year ago.

ResMed is expected to post earnings of $1.49 per share for the current quarter, representing a year-over-year change of +10.4%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for ResMed. Also, the stock has a VGM Score of D.


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