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Phibro (PAHC) Down 18.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Phibro Animal Health (PAHC - Free Report) . Shares have lost about 18.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Phibro due for a breakout? 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 Q4 Earnings Miss Estimates, Sales Surpass

Phibro Animal Health’s adjusted earnings per share of 36 cents for the fourth quarter of fiscal 2022 reflected a 12.5% increase from the year-ago adjusted figure. However, the metric lagged the Zacks Consensus Estimate by 10%.

Meanwhile, without adjustments, GAAP earnings per share for the fiscal fourth quarter was 18 cents, down 57.1% from the year-ago figure.

For fiscal 2022, adjusted earnings per share was $1.31, up 3.2% from the year-ago figure.

Net Sales

In the quarter under review, net sales totaled $255.3 million, up 15.9% from the year-ago quarter. The figure beat the Zacks Consensus Estimate by 0.9%.
Net sales totaled $942.3 million for fiscal 2022, up 13.1% from the year-ago number.

Segmental Sales Break-Up

In the fiscal fourth quarter, Animal Health’s net sales increased 13.5% to $166.5 million. Within the segment, sales of medicated feed additives (MFAs) and others were $101.7 million, reflecting 11.5% year-over-year growth. The uptick was driven by higher demand for MFAs, particularly in the Latin America and Canada regions, and for processing aids used in the ethanol fermentation industry.

Within Animal Health, nutritional specialty product sales rose 15.5% to $42.5 million, primarily banking on higher domestic demand for dairy, growth in the Asia Pacific region and volume growth in the companion animal product.

Apart from this, net vaccine sales totaled $22.3 million, showing a year-over-year rise of 19.3% on increased domestic and international uptake.

Net sales in the Mineral Nutrition segment rose 22.2% year over year to $69.4 million on the increase in average selling prices of trace minerals, linked to the movement of the underlying raw material costs.

Net sales in the Performance Products segment rose 15.6% to $19.3 million. This growth was driven by higher volumes and average selling prices of copper-based products, as well as increased volumes of ingredients for personal care products.

Margins

Phibro’s fiscal fourth-quarter gross profit rose 12.5% year over year to $78.5 million. However, the gross margin contracted 94 basis points (bps) to 30.8% on a 17.5% rise in the cost of goods sold to $176.8 million.

Selling, general and administrative expenses in the reported quarter were $55.5 million, up 9.5% from the year-ago quarter.

Operating profit improved 20.4% year over year to $23 million and operating margin expanded 34 bps to 9% in the quarter under review.

Financial Update

The company exited the fiscal fourth quarter with cash and short-term investments in hand of $91 million compared with $93 million at the end of third-quarter fiscal 2022.

Cumulative net cash used in operating activities at the end of the fourth quarter was $31.6 million compared with $48.3 million a year ago.

Cumulative capital expenditure amounted to $37 million at the end of the fourth quarter of fiscal 2022 compared with $29.3 million in the year-ago quarter.

Outlook

Phibro provided its financial guidance for fiscal 2023.

The company expects net sales between $960 million and $1 billion for fiscal 2023. The Zacks Consensus Estimate for the metric is pegged at $971.67 million.

The adjusted EPS is expected to be $1.28-$1.38. The Zacks Consensus Estimate for the same is pegged at $1.44.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Phibro has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. It's no surprise Phibro has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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