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Why Is Perrigo (PRGO) Up 2.8% 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 2.8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Perrigo Beats on Q1 Earnings and Sales

Perrigo reported first-quarter 2019 adjusted earnings of $1.14 per share, which beat the Zacks Consensus Estimate of $1.09. The bottom line increased 6.5% year over year.

Net sales increased 14.2% year over year to $1.34 billion, beating the Zacks Consensus Estimate of $1.32 billion by a slight margin. The year-over-year growth was driven by addition of products from the recently closed Ranir acquisition and higher demand for existing products. Higher demand for consumer products and sales of new products was partially offset by a loss of $11 million in sales from discontinued products and pricing pressure in Prescription Pharmaceuticals segment. Sales rose 17.6% excluding exited businesses and the impact of foreign currency movement. Organic net sales (excludes sales of Ranir products, exited businesses and the impact of currency) were up 11% year over year.

Moreover, the company’s business received a boost with increase in demand for self-care products and drugs during March due to stockpiling by customers amid COVID-19 pandemic. The company estimates that this additional demand has added $90 million to $110 million to net sales.

Segment Discussion

CSCA: Net sales of the segment in the first quarter of 2019 came in at $701 million, up 20.4% year over year, driven by higher sales of over-the-counter (“OTC”) and nutrition businesses, increased demand related to COVID-19 and $55 million of net sales from products added after the Ranir acquisition. Excluding net sales from exited businesses, additional sales from Ranir’s products and the impact of foreign currency movement, net sales at CSCA increased approximately 15%. Excluding the exited animal health business, CSCA net sales were up 24.8%.

CSCI: The segment reported net sales of $383 million, up 9.1% from the year-ago period. The growth was driven by new product sales of $30 million, especially weight loss product XLS Forte 5, and $21 million of net sales from Ranir's products, as well as higher brand OTC sales attributed to COVID-19 in the United Kingdom. Excluding net sales from Ranir’s products and the impact of foreign currency movement and exited businesses, sales increased 8.1%.

Rx Segment: Net sales of the segment increased 6.5% to $258 million. The upside can be attributed to new product sales of $58 million, led by the launch of generic version of Teva’s inhaler — ProAir HFA — partially offset by pricing pressure associated with testosterone gel. The company lost $5 million in sales from discontinued products.

2020 Guidance

Perrigo maintained its guidance for 2020 due to the current volatility and uncertainty associated with the COVID-19 pandemic. The potential impact on demand and ability to manufacture and supply product also remain uncertain.

On its fourth-quarter earnings call, Perrigo had guided adjusted earnings in the range of $3.95 to $4.15 per share. It anticipated net sales to grow 6-7% year over year in 2020. Organic growth in net sales was expected to be approximately 3%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Perrigo has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, 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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