Perrigo Company plc (PRGO - Free Report) reported second-quarter 2017 earnings of $1.22 per share, which beat the Zacks Consensus Estimate of 95 cents per share by 28.4%. However, adjusted earnings declined 5.4% from the year-ago figure.
The company, however, reported loss of 49 cents per share for the same period, including amortization and restructuring charges and other one-time items. This figure narrowed 87% year over year.
Net sales in the reported quarter declined 8% to $1.24 billion as divestures of some businesses and currency headwinds hurt the top line. But revenues surpassed the Zacks Consensus Estimate of $1.18 billion.
Excluding the impact of currency and divestures, sales improved on the back of positive execution across all business segments.
Shares of Perrigo have rallied more than 12% in pre-market hours. However, the company’s shares have significantly underperformed the industry so far this year. The stock has lost 8.3% compared with the broader industry’s gain of 17.8%.
In January, Perrigo announced to having changed its reporting segments following the sale of the Tysabri royalty stream earlier in March this year. Effective from Jan 1, 2017, the company’s new reporting segments are: Consumer Health Care Americas (CHCA), Consumer Health Care International (CHCI), Prescription Pharmaceuticals (RX) and Other Segment.
CHCA: CHCA net sales in the second quarter of 2017 came in at $605 million, down 4% due to sale of the vitamins, minerals and supplements (VMS) business in Jun 2016, which had contributed to segmental sales in the prior year.
The company reported higher new product sales in the quarter, driven by continued strong net sales of the store brand version of Flonase. However, these were offset by lower sales of animal health, analgesics and cough and cold categories.
CHCI: CHCI segment reported net sales of $377 million, down 9% (declined 6% on a constant-currency basis) from the year-ago period. Excluding year-over-year contributions from the divested European distribution businesses and currency headwinds, organic net sales increased approximately 4% due to higher sales of new products.
Net sales of existing products also rose primarily on higher sales in the allergy, analgesic plus cough and cold categories.
Prescription Pharmaceuticals (RX): The Prescription Pharmaceuticals segment also showed a sluggish performance during the quarter, with net sales declining 13% to $267 million, both on a reported and constant-currency basis. This dip in sales can be attributed to lower sales of Entocort, due to competitive pressures and price erosion. However, the lower sales were partially offset by higher sales of existing and new products.
During the quarter, the company announced that it has reached an agreement to divest its Israel Active Pharmaceutical Ingredient (API) business for an amount of $110 million in cash. The company had been looking for strategic alternatives for the API unit since February this year.
2017 Earnings Outlook Updated
Perrigo increased its earnings outlook for 2017 due to the sale of the API business and a continued positive execution across all business segments. The company now expects adjusted earnings per diluted share in the range of $4.45-$4.70 compared with $4.15-$4.50, projected previously.
Zacks Rank & Key Picks
Perrigo currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the pharma sector are Summit Therapeutics PLC (SMMT - Free Report) , Aduro Biotech, Inc. (ADRO - Free Report) and Enzo Biochem, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Summit’s loss per share estimates narrowed from $2.59 to 32 cents for 2018 over the last 60 days. The company delivered a positive earnings surprise in each of the trailing four quarters with an average beat of 25.55%. Its share price surged 64.5% so far this year.
Aduro Biotech’s loss per share estimates narrowed from $1.46 to $1.36 for 2017 over the last 30 days. The company delivered positive surprises in two of the trailing four quarters with an average beat of 2.53%. The stock is up 13% in the last six months.
Enzo Biochem’s loss per share estimates narrowed from 12 cents to 7 cents for 2017 and from 11 cents to 3 cents for 2018 over the last 60 days. The company came up with a positive earnings surprise in all the trailing four quarters with an average beat of 55.83%. The stock surged 67.9% so far this year.
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