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Why Is Perrigo (PRGO) Up 6.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Perrigo (PRGO - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Perrigo due for a pullback? 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 catalysts.

Perrigo Beats on Q2 Earnings and Sales

Perrigo reported second-quarter 2019 adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate of 81 cents. However, the bottom line decreased 29.4% year over year.

Net sales declined 3.1% year over year to $1.15 billion but outpaced the Zacks Consensus Estimate of $1.13 billion. The year-over-year decline was mainly due to poor performance of the Consumer Self-Care segment in international markets. Sales of $65 million from new products were partially offset by a loss of $27 million in sales from discontinued products. Currency movement had an unfavorable impact of $24 million. Sales declined 1.1% excluding the impact of foreign currency movement.

Segment Discussion

CSCA: Net sales of the segment in the second quarter of 2019 came in at $582 million, down 2.5% year over year. Excluding net sales from the divested animal health business and exited infant foods products, net sales at CSCA increased approximately 1% to $560 million. Sales of the major revenue generator in the segment, the OTC business, increased 4% year over year on the back of an extended cough/cold season, good performance of anti-allergy drugs, as well as increased sales of gastrointestinal and smoking cessation products. New drugs sales were $8 million driven by store brand equivalent of J&J’s multi-symptom relief drug, Imodium. However, the growth was partially offset by lower sales of infant nutrition category and lost sales from discontinued products of $11 million.

CSCI: The segment reported net sales of $328 million, down 8.5% from the year-ago period. However, on a constant-currency basis, the metric decreased 1.8%. Net sales of the analgesics category and new product sales of $30 million, mainly driven by the launch of weight loss product XLS Forte 5, were partially offset by lower sales in cough/cold and anti-parasites categories. The company lost sales of $6 million from discontinued products.

The CSCI segment has grown organically over the past 12 months and was able to maintain its market share in international markets. With the launch of new products, CSCI segment is expected to continue its growth trend. However, currency movement may have an unfavorable impact on the top line.

Rx Segment: Net sales of the segment increased 3.4% to $239 million on a reported as well as constant-currency basis. The upside can be attributed to new product sales of $27 million and continued moderation of pricing pressure in the generics industry. The company lost $9 million in sales from discontinued products.

2019 Outlook

Perrigo maintained its guidance for adjusted earnings. The company expects adjusted earnings per share in the range of $3.75 to $4.05, including impact of Ranir acquisition and Animal Health divestiture. The company anticipates an increment of up to 10 cents to the guided earnings range from the potential launch of the generic version of ProAir and/or additional 5 cents from Project Momentum cost savings.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

Currently, Perrigo has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

Perrigo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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