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Phirbo (PAHC) Faces Rising Costs and Inflationary Pressure
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Phibro Animal Health (PAHC - Free Report) revenues are likely to be impacted by unfavorable currency movement. Moreover, headwinds such as a tough competitive scenario continue to pose a threat. The stock carries a Zacks Rank #4 (Sell).
Phibro’s adjusted earnings per share for fourth-quarter fiscal 2022 missed the Zacks Consensus Estimate. The company’s gross margin contracted 94 basis points on a 17.5% rise in the cost of goods sold. Meanwhile, selling, general and administrative expenses rose 9.5% in the quarter under review. These escalating expenses are weighing on the company’s bottom line.
The ongoing pandemic-led inflationary environment also continues to result in higher raw material and labor costs, exerting further pressure on Phibro’s margins.
The company is subject to currency risk to the extent that its costs are denominated in currencies other than those in which the company earns revenues. Notably, Phibro manufactures some of its major products in Brazil and Israel, where production costs are largely denominated in local currencies, while selling prices are largely set in U.S. dollars. The company is exposed to changes in the cost of goods sold resulting from currency movements and may not be able to adjust its selling prices to offset such movements. In fact, management, in particular, believes that the currently strong U.S. dollar is affecting the company’s export market.
Price competition coming from cheap generic alternatives of a few Phirbo products is another deterrent.
On a positive note, Phibro exited fourth-quarter fiscal 2022 with better-than-expected revenues. The substantial year-over-year growth in revenues and adjusted earnings per share is impressive. Double-digit growth across Animal Health, Mineral Health and Performance Products segments reflects continued robust demand for the company’s product portfolio.
Within Animal Health, net sales increased 13.5% year over year on an 11.5% sales growth in medicated feed additives (MFAs) and others, a 15.5% increase in nutritional specialty product sales and a 19.3% rise in net vaccine sales. The Mineral Nutrition segment saw a 22.2% year-over-year increase in net sales on higher average selling prices of trace minerals. Further, net sales in the Performance Products segment rose 15.6%, led by strong demand and pricing for copper-based products and the continued uptake of personal care products ingredients.
The company earlier noted that it is focused on expanding its footprint in the poultry, swine and cattle industries, in 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 signed an agreement with Virbac to distribute generic DRAXXIN in Canada. In terms of vaccinations, the company is looking forward to the opportunities around its new vaccine facility in Sligo, Ireland. Recently, the company collaborated with Rejuvenate Bio, Inc. to develop and commercialize a gene therapy for Mitral Valve Disease in canines.
In the past six months, Phibro has outperformed its industry. The stock has lost 26.4% compared with the industry’s 35.6% fall.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, 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 lost 12.8% against the industry’s 38.3% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 31.1% against the industry’s 32.6% fall over the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 76% against the industry’s 14.5% fall.
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Phirbo (PAHC) Faces Rising Costs and Inflationary Pressure
Phibro Animal Health (PAHC - Free Report) revenues are likely to be impacted by unfavorable currency movement. Moreover, headwinds such as a tough competitive scenario continue to pose a threat. The stock carries a Zacks Rank #4 (Sell).
Phibro’s adjusted earnings per share for fourth-quarter fiscal 2022 missed the Zacks Consensus Estimate. The company’s gross margin contracted 94 basis points on a 17.5% rise in the cost of goods sold. Meanwhile, selling, general and administrative expenses rose 9.5% in the quarter under review. These escalating expenses are weighing on the company’s bottom line.
The ongoing pandemic-led inflationary environment also continues to result in higher raw material and labor costs, exerting further pressure on Phibro’s margins.
Phibro Animal Health Corporation Price
Phibro Animal Health Corporation price | Phibro Animal Health Corporation Quote
The company is subject to currency risk to the extent that its costs are denominated in currencies other than those in which the company earns revenues. Notably, Phibro manufactures some of its major products in Brazil and Israel, where production costs are largely denominated in local currencies, while selling prices are largely set in U.S. dollars. The company is exposed to changes in the cost of goods sold resulting from currency movements and may not be able to adjust its selling prices to offset such movements. In fact, management, in particular, believes that the currently strong U.S. dollar is affecting the company’s export market.
Price competition coming from cheap generic alternatives of a few Phirbo products is another deterrent.
On a positive note, Phibro exited fourth-quarter fiscal 2022 with better-than-expected revenues. The substantial year-over-year growth in revenues and adjusted earnings per share is impressive. Double-digit growth across Animal Health, Mineral Health and Performance Products segments reflects continued robust demand for the company’s product portfolio.
Within Animal Health, net sales increased 13.5% year over year on an 11.5% sales growth in medicated feed additives (MFAs) and others, a 15.5% increase in nutritional specialty product sales and a 19.3% rise in net vaccine sales. The Mineral Nutrition segment saw a 22.2% year-over-year increase in net sales on higher average selling prices of trace minerals. Further, net sales in the Performance Products segment rose 15.6%, led by strong demand and pricing for copper-based products and the continued uptake of personal care products ingredients.
The company earlier noted that it is focused on expanding its footprint in the poultry, swine and cattle industries, in 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 signed an agreement with Virbac to distribute generic DRAXXIN in Canada. In terms of vaccinations, the company is looking forward to the opportunities around its new vaccine facility in Sligo, Ireland. Recently, the company collaborated with Rejuvenate Bio, Inc. to develop and commercialize a gene therapy for Mitral Valve Disease in canines.
In the past six months, Phibro has outperformed its industry. The stock has lost 26.4% compared with the industry’s 35.6% fall.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, 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 lost 12.8% against the industry’s 38.3% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 31.1% against the industry’s 32.6% fall over the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 76% against the industry’s 14.5% fall.