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Why Is Phibro (PAHC) Up 0.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Phibro Animal Health (PAHC - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Phibro 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.

Phibro's Q4 Earnings Miss Estimates

Phibro Animal Health Corporation  reported adjusted earnings per share (EPS) of 33 cents in the fourth quarter of fiscal 2019, showing a 28% drop from the year-ago number. The figure missed the Zacks Consensus Estimate by 2.9%.

Meanwhile, without adjustments, reported EPS was 22 cents, reflecting a fall of 60% from the year-ago count.

For fiscal 2019, adjusted EPS came in at $1.53, down 12% from the year-ago figure. The metric beat the consensus mark by 0.7%.

Net Sales

In the quarter under review, net sales totaled $203.9 million, down 3.7% year over year owing to substantially lower sales at two core segments — Animal Health and Mineral Nutrition.

For 2019, net sales totaled $828 million, up 1% from the year-ago tally. However, the figure missed the Zacks Consensus Estimate by 0.2%.

Segmental Sales Break-Up

During the fourth quarter, Animal Health net sales declined 4% to $132 million. Within this segment, the company registered $86.3 million in sales, reflecting a 6% decline in medicated feed additives (MFAs). This was on account of lower demand owing to African swine fever outbreak in China and consistently lower domestic demand from the poultry and swine sectors. Nutritional specialty product sales rose 1% to $28.6 million, asconsistently dismal domestic dairy conditions and lowered demand from poultry customers was offset by international volume growth in dairy products. Apart from this, net vaccine sales totaled $17.2 million, showing a drop of 1% year over year due to the loss of a domestic distribution arrangement and the continued impact of turbulent economic conditions in certain foreign markets.

Net sales at the Mineral Nutrition segment fell 7% year over year to $56 million owing tounfavorable product mix and lower average selling prices.

Net sales at the Performance Products segment rose 15% to $15.9 million backed by higher volumes of personal care products.

Operational Update

Phibro’s fourth-quarter gross profit declined 3.3% year over year to $65.3 million. Gross margin expanded 16 basis points (bps) to 32%.

Selling, general and administrative expenses in the reported quarter came in at $53.2 million, up 28.5% from the year-ago quarter.  

Operating profit declined 53.6% year over year to $12.1 million and operating margin contracted 639 bps to 5.9% in the quarter under review.

Financial Update

The company exited fiscal 2019 with net cash used by operating activities of $14.1 million, down from the year-ago $84.6 million. Capital expenditure amounted to $10.1 million in this quarter, reflecting an increase from $5.5 million in the prior-year quarter.

FY20 Outlook

The company has initiated its guidance for fiscal 2020. Net sales are projected in the range of $833-863 million (an increase of 1-4%). Adjusted EPS is estimated in the band of $1.08-1.15.

The Zacks Consensus Estimate for fiscal revenues 2019 is pegged at $862.6 million, within the guided range. The same for adjusted EPS is pegged at $1.61, above the guided range.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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