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Here's Why Investors Should Buy Phibro (PAHC) Stock Now
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Phibro Animal Health Corporation (PAHC - Free Report) is likely to grow in the coming quarters, backed by its booming vaccine business, particularly with its expanded manufacturing capacity in Brazil. The company’s diversified product portfolio strongly positions it for future growth. Favorable solvency buoys optimism. However, macroeconomic headwinds and competitive pressures from generic alternatives of products remain concerning for its operations.
In the past year, this Zacks Rank #2 (Buy) stock has decreased 16.3% against the 6.1% rise of the industry and 30.4% growth of the S&P 500 composite.
The renowned animal health and mineral nutrition company has a market capitalization of $505.5 million. PAHC carries an earnings yield of 8.97%, against the industry’s yield of -0.13%. In the last reported quarter, Phibro delivered an earnings surprise of 22.22%.
Let’s delve deeper.
Factors at Play
Prospering Vaccine Business: Phibro is focusing on new developments along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. The company also makes significant investments to expand vaccine manufacturing capacity at several locations. Recently, Phibro began operations at a new vaccine production facility in Guarulhos, Brazil, that manufactures and markets autogenous vaccines against animal diseases for swine, poultry and aquaculture.
Image Source: Zacks Investment Research
The vaccine product line witnessed a robust 31% improvement in the second quarter of fiscal 2024, driven by a strong uptake across various regions, especially in Latin America, and also benefited from the growing domestic demand. The company launched new commercial vaccines and looks forward to bringing additional vaccines to the Americas.
Diversified Portfolio: Phibro’s key animal health products, including MFAs (Medicated Feed Additives) and nutritional specialty products, facilitate enhancing animal nutrition. The company’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine.
Phibro’s nutritional product offerings, such as OmniGen-AF and Animate, are used increasingly in the global dairy industry. The company also manufactures vaccines to protect animals from both viral and bacterial diseases and has been actively investing in the companion animal business and pipeline for both short and medium-term growth.
Meanwhile, Phibro’s mineral nutrition products strengthen an animal’s diet and help maintain its optimal health. During the second quarter of fiscal 2024, the company registered a 5% increase in MFAs and others, driven by the increased sales of processing aids used in the ethanol fermentation industry and demand from international markets. In the United States, Phibro delivered strong sales from a new line of nutritional specialty products for poultry.
Stable Solvency Structure: Phibro demonstrates stable solvency, closing the second quarter of fiscal 2024 with cash and short-term investments of $92.5 million and near-term debt payable of $26 million. The total debt of $475 million was down from $483 million at the end of the first quarter of 2024.
Meanwhile, Phibro’s capital deployment policy is based on the return of shareholders’ money through dividends and share buybacks. The company’s current payout ratio has risen to 42.1% from 41.7% at the end of the fiscal first quarter.
Downsides
Macroeconomic Concerns: Phibro’s gross and operating margins decreased in the second quarter of fiscal 2024 due to higher expenses. In a challenging macro environment, the Mineral Nutrition business has been facing adverse movements in commodity prices and inventory positions. While the margins may return to some historical levels as the fiscal year progresses, Phibro anticipates that volume recovery might be longer. Additionally, sales of Performance Products dropped 19% year over year due to the reduced demand for personal care product ingredients and industrial chemicals.
Generic Pressure to Affect Growth: Phibro also faces competition from generic alternatives of some of its products and mainly depends on trade secrets for competitive advantages. The protection afforded is limited by the availability of new competitive products or generic versions of existing products that can successfully compete with Phibro’s products.
The increasing aggressiveness in pricing among generic competitors poses a worry, particularly since generic products form a considerable proportion of overall animal health sales in certain regions. If animal health customers increase their use of new or existing generic products, it will adversely affect Phibro’s financial health and operational performance.
Estimate Trend
The Zacks Consensus Estimate for Phibro’s 2024 earnings per share (EPS) has moved up to $1.12 from $1.11 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $992.3 million. This suggests a 1.5% rise from the year-ago reported number.
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 58.6% compared with the industry’s 15.7% rise in the past year.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.35% compared to the industry’s -0.13%. Shares of the company have increased 28.9% compared with the industry’s 6.1% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 77.4% compared with the industry’s 24.3% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.
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Here's Why Investors Should Buy Phibro (PAHC) Stock Now
Phibro Animal Health Corporation (PAHC - Free Report) is likely to grow in the coming quarters, backed by its booming vaccine business, particularly with its expanded manufacturing capacity in Brazil. The company’s diversified product portfolio strongly positions it for future growth. Favorable solvency buoys optimism. However, macroeconomic headwinds and competitive pressures from generic alternatives of products remain concerning for its operations.
In the past year, this Zacks Rank #2 (Buy) stock has decreased 16.3% against the 6.1% rise of the industry and 30.4% growth of the S&P 500 composite.
The renowned animal health and mineral nutrition company has a market capitalization of $505.5 million. PAHC carries an earnings yield of 8.97%, against the industry’s yield of -0.13%. In the last reported quarter, Phibro delivered an earnings surprise of 22.22%.
Let’s delve deeper.
Factors at Play
Prospering Vaccine Business: Phibro is focusing on new developments along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. The company also makes significant investments to expand vaccine manufacturing capacity at several locations. Recently, Phibro began operations at a new vaccine production facility in Guarulhos, Brazil, that manufactures and markets autogenous vaccines against animal diseases for swine, poultry and aquaculture.
Image Source: Zacks Investment Research
The vaccine product line witnessed a robust 31% improvement in the second quarter of fiscal 2024, driven by a strong uptake across various regions, especially in Latin America, and also benefited from the growing domestic demand. The company launched new commercial vaccines and looks forward to bringing additional vaccines to the Americas.
Diversified Portfolio: Phibro’s key animal health products, including MFAs (Medicated Feed Additives) and nutritional specialty products, facilitate enhancing animal nutrition. The company’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine.
Phibro’s nutritional product offerings, such as OmniGen-AF and Animate, are used increasingly in the global dairy industry. The company also manufactures vaccines to protect animals from both viral and bacterial diseases and has been actively investing in the companion animal business and pipeline for both short and medium-term growth.
Meanwhile, Phibro’s mineral nutrition products strengthen an animal’s diet and help maintain its optimal health. During the second quarter of fiscal 2024, the company registered a 5% increase in MFAs and others, driven by the increased sales of processing aids used in the ethanol fermentation industry and demand from international markets. In the United States, Phibro delivered strong sales from a new line of nutritional specialty products for poultry.
Stable Solvency Structure: Phibro demonstrates stable solvency, closing the second quarter of fiscal 2024 with cash and short-term investments of $92.5 million and near-term debt payable of $26 million. The total debt of $475 million was down from $483 million at the end of the first quarter of 2024.
Meanwhile, Phibro’s capital deployment policy is based on the return of shareholders’ money through dividends and share buybacks. The company’s current payout ratio has risen to 42.1% from 41.7% at the end of the fiscal first quarter.
Downsides
Macroeconomic Concerns: Phibro’s gross and operating margins decreased in the second quarter of fiscal 2024 due to higher expenses. In a challenging macro environment, the Mineral Nutrition business has been facing adverse movements in commodity prices and inventory positions. While the margins may return to some historical levels as the fiscal year progresses, Phibro anticipates that volume recovery might be longer. Additionally, sales of Performance Products dropped 19% year over year due to the reduced demand for personal care product ingredients and industrial chemicals.
Generic Pressure to Affect Growth: Phibro also faces competition from generic alternatives of some of its products and mainly depends on trade secrets for competitive advantages. The protection afforded is limited by the availability of new competitive products or generic versions of existing products that can successfully compete with Phibro’s products.
The increasing aggressiveness in pricing among generic competitors poses a worry, particularly since generic products form a considerable proportion of overall animal health sales in certain regions. If animal health customers increase their use of new or existing generic products, it will adversely affect Phibro’s financial health and operational performance.
Estimate Trend
The Zacks Consensus Estimate for Phibro’s 2024 earnings per share (EPS) has moved up to $1.12 from $1.11 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $992.3 million. This suggests a 1.5% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) and DaVita (DVA - Free Report) .
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 58.6% compared with the industry’s 15.7% rise in the past year.
CAH carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.35% compared to the industry’s -0.13%. Shares of the company have increased 28.9% compared with the industry’s 6.1% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 77.4% compared with the industry’s 24.3% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.