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Phibro Animal (PAHC) Q4 Earnings Beat, Sales Improve Y/Y

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Phibro Animal Health Corporation (PAHC - Free Report) reported adjusted earnings per share (EPS) of 46 cents in the fourth quarter of fiscal 2018, up 17.9% year over year. Adjusted EPS surpassed the Zacks Consensus Estimate of 44 cents.

According to the company, the year-over-year improvement was primarily driven by higher gross profit, reduced interest expenses as well as a drop in effective income tax rate.

Reported EPS of 55 cents was up 44.7% from a year ago.

Full-year adjusted EPS came in at $1.74, up from the year-ago $1.51. Also, the figure beat the Zacks Consensus Estimate of $1.71.

Net Sales

In the reported quarter, net sales totaled $211.8 million, up 8.7% year over year. The improvement was driven by sales growth at the Animal Health, Mineral Nutrition and Performance Products segments.

Fiscal 2018 revenues of $820 million were up 7.3% from the year-ago figure. The figure also surpassed the Zacks Consensus Estimate of $817.2 million.

Sales by Segments

Net sales at the Animal Health segment increased 7% to $137.7 million in the reported quarter on volume increase at Nutritional specialty and Vaccine product groups within the segment. Nutritional specialty products grew less than 1%, principally on volume growth of products for poultry which was largely offset by decreased sales to the dairy sector which is grappling with weak conditions. Further, sales from Vaccines increased 7%, majorly on global volume growth.

Moreover, sales at Medicated feed additives (MFAs) and other grew 9% primarily on strength in international business. International net sales were driven by growth in most regions, including benefits from a recent buyout and additional penetration in the cattle sector. Domestic net sales at MFAs and Other remained flat year over year.

Net sales at the Mineral Nutrition segment rose 14% to $60.3 million on higher average selling prices resulting from an increase in underlying raw material commodity price.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

 

Net sales at the Performance Products segment rose 3% to $13.8 million on higher average selling prices of copper-based products and rising volumes of personal care ingredients. However, this growth was partially offset by reduced volumes of copper-based products.

Operational Update

Phibro’s fourth-quarter gross profit increased 7% year over year to $67.5 million. However, gross margin contracted 50 basis points (bps) to 31.9%.

Selling, general and administrative expenses rose 5% to $41.4 million. However, operating margin expanded 20 bps to 12.3% in the quarter.

Financial Update                                                             

Phibro generated $70 million of cash flow from operations in fiscal 2018, down from the year-ago $98.4 million. Capital expenditure amounted to $18.5 million in this period, reflecting a reduction from $20.9 million in the year-ago period.

FY19 View Issued

Phibro has issued its guidance for fiscal 2019. The company expects to generate net sales of $850-$875 million. The current Zacks Consensus Estimate of $851.3 million is within the guided range.

Phibro projects adjusted EPS in the $1.72-$1.77 band. The current Zacks Consensus Estimate of $1.88 is above the company's guided range.

Our Take

Phibro ended fourth-quarter fiscal 2018 on a solid note. The company witnessed considerable improvement across all segments. Moreover, the company believes that continuous investments in portfolio enhancement and development of organizational capabilities have started to pay off. The company also seems to be upbeat about strength in the international business within the Animal Health segment.

Moreover, the company is busy arranging funds from third parties to invest in the development of technologies and products. Phibro is focusing on new developments along with incremental registrations and growing volumes of its existing nutritional specialties and vaccines technologies as well. 

Zacks Rank & Key Picks

Phibro has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space, which also reported solid earnings this season, are Intuitive Surgical, Inc (ISRG - Free Report) , Illumina, Inc (ILMN - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .

All the three stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina reported adjusted EPS of $1.43, beating the consensus mark of $1.11.

Integer Holdings posted adjusted EPS of $1.06 in the second quarter of 2018, surpassing the Zacks Consensus Estimate of 90 cents.

Intuitive Surgical reported adjusted EPS of $2.76 in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

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