Perrigo Company plc (PRGO - Free Report) reported first-quarter 2019 adjusted earnings of $1.07 per share, which beat the Zacks Consensus Estimate of 94 cents. However, the bottom line decreased 15.2% year over year.
Net sales declined 3.5% year over year to $1.18 billion but outpaced the Zacks Consensus Estimate of $1.15 billion. The year-over-year decline was mainly due to poor performance of the Consumer Health segment globally. Sales of $55 million from new products were partially offset by a loss of $23 million in sales from discontinued products. Currency movement had an unfavorable impact of $36 million. Sales declined 0.6% excluding impact of foreign currency movement.
Shares of Perrigo were up 2.1% in pre-market trading on May 9, following the earnings release. The company’s shares have rallied 26.8% so far this year compared with the industry’s rise of 9.8%.
Perrigo updated its reporting segments as part of its self-care strategy. The updated segments are Consumer Self Care Americas (“CSCA”), Consumer Self Care International (“CSCI”) and Prescription Pharmaceuticals (“RX”). During the quarter, the company initiated a process to transform itself from a healthcare to consumer self-care company.
CSCA: Net sales of the segment in the first quarter of 2019 came in at $582 million, down 3.3% year over year. Weak performance of cough and cold and analgesics categories and loss of sales due to exited infant foods product line and loss of partnered product in animal health business were partially offset by higher sales in gastrointestinal category, especially omeprazole, stored brand OTC equivalent ofProcter & Gamble’s (PG - Free Report) Prilosec OTC. Similar performance of Johnson & Johnson’s (JNJ - Free Report) multi-symptom relief drug, Imodium, and Merck’s allergy drug, Nasonex nasal spray will likely boost the top line going forward.
Excluding net sales from the animal health and exited infant foods products and the effect of unfavorable currency movements, net sales at CSCA declined 1.5%.
The company decided to exit the infant foods product line in 2018. The product line added $5 million to net sales in the first quarter. However, the product line is not expected to generate revenues anymore for the CSCA segment.
New product sales of $7 million were completely offset by lost sales from discontinued products of $11 million.
Concurrent with the earnings release, the company announced that it has agreed to divest its animal health segment for $185 million in cash to pet medication and wellness company, PetIQ (PETQ - Free Report) .
CSCI: The segment reported net sales of $351 million, down 7.1% from the year-ago period. However, on a constant-currency basis, the metric increased 1.7%. Net sales of dermatological category and new product sales of $26 million, mainly driven by the launch of the weight loss product XLS Forte 5, were partially offset by lower sales in lifestyle and personal care categories. The company lost sales of $2 million from discontinued products.
The CSCI segment grew organically during the quarter. It was able to maintain its market share in international markets. With launch of new products, CSCI segment is expected to remain on growth trend. However, currency movement may have unfavorable impact on the top line.
Rx Segment: Net sales of the segment increased 1.8% to $242 million on a reported basis and 2.4% on a constant-currency basis. The upside can be attributed to new product sales of $22 million and continued moderation of pricing pressure., partially offset by decelerating pricing pressure in core products loss. The company lost $10 million in sales from discontinued products.
Meanwhile, the Rx segment continues to face intense competition from other generic drug producers and brand-name pharmaceutical companies, which are launching their own generic version of their branded products.
Perrigo reported encouraging first-quarter results with earnings and sales beating estimates. Though sales declined in both the CSCA and CSCI segment, the company’s Rx segment seems to be recovering after a weak 2018. However, it remains to be seen whether the momentum continues going ahead in 2019.
These apart, the Irish High Court granted a leave to Perrigo for judicial review of the Irish Revenue tax assessment. The company has already appealed against the tax assessment before the Tax Appeals Commission., The appeal has been stayed till judicial review is over. Perrigo will lose almost $1.9 billion if the commission rules against the company.
Perrigo currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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