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Is a Beat in Store for Perrigo (PRGO) This Earnings Season?

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Zacks Equity Research
·4 min read
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We expect Perrigo Company plc PRGO to beat expectations when it reports first-quarter 2020 results before market open on Apr 30. However, in the last reported quarter, Perrigo delivered a negative earnings surprise of 2.75%.

The company’s earnings beat the Zacks Consensus Estimate in three of the last four reported quarters and missed the same once with the average positive surprise being 7.27%.

Shares of the company have declined 0.5% so far this year compared with the industry’s decrease of 6.4%.

Let’s see how things have shaped up for this announcement.

First-Quarter 2020 Preliminary Results

On Apr 7, Perrigo announced preliminary results for the first quarter. Preliminary net sales were $1.3 billion for the quarter, 14% higher than the year-ago quarter. Sales benefitted from higher demand of essential products in March related to the COVID-19 pandemic.

The CSCA segment reported year-over year preliminary net sales growth of almost 20% during the quarter with 15% increase in adjusted organic net sales. The CSCI segment also witnessed a 9% rise in reported net sales with adjusted organic net sales growth of 8%. Further, during the first quarter, net sales in the Rx segment grew 6% year over year. Launch of generic version of Teva’s TEVA ProAir HFA (albuterol sulfate inhalation aerosol) for asthma is expected to have benefited the segment.

Factors to Consider

The addition of products following the acquisition of Ranir Global Holdings in 2019 boosted sales of Perrigo’s Consumer Self Care Americas (“CSCA”) and Consumer Self Care International (“CSCI”) segments in the last two quarters of 2019. The favorable impact is likely to have continued in the soon-to-be-reported quarter. Moreover, the new products saw improved sales in the past year — a trend that most likely continued in the first quarter. However, loss of sales discontinued products and exited business, especially its Animal Health business sold to PetIQ PETQ last year, might have offset the gain from new products.

Although Perrigo is looking to spin-off its Rx business, higher sales of new products in the Rx segment are likely to have driven segment sales. However, pricing pressure in the Rx segment is likely to have been a dampener.

The bottom line is likely to reflect the favorable impact of the ongoing restructuring initiatives and operating expense discipline.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Perrigo this time around.  The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.11 per share) and the Zacks Consensus Estimate ($1.09 per share) is +1.46%.

Zacks Rank: Perrigo currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Perrigo Company plc Price and Consensus


Perrigo Company plc Price and Consensus
Perrigo Company plc Price and Consensus

Perrigo Company plc price-consensus-chart | Perrigo Company plc Quote

Another Stock That Warrants a Look

Here is a pharma stock that you may also want to consider, as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release.

GlaxoSmithKline plc GSK has an Earnings ESP of +3.19% and a Zacks Rank #3. The company is scheduled to release first-quarter results on Apr 29.

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Teva Pharmaceutical Industries Ltd. (TEVA) : Free Stock Analysis Report
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PetIQ, Inc. (PETQ) : Free Stock Analysis Report
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