Here's Why You Should Add Phibro (PAHC) to Your Portfolio
Phibro Animal Health Corporation PAHC has been gaining on robust growth in its Performance Products arm. Its better-than-expected results in the second quarter of fiscal 2021 buoy optimism. Its prospering vaccine business and diversified product portfolio also look encouraging. However, downsides may result from a stiff competitive landscape. Also, dull performance by the company’s Animal Health segment is worrying.
Over the past year, this Zacks Rank #2 (Buy) stock has lost 1% against 23.2% growth of the industry and 52.8% rise of the S&P 500.
Per the Style Score, Phibro has a Growth Score of B, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
The renowned global diversified animal health and mineral nutrition company has a market capitalization of $992.7 million. The company projects 10.6% growth for the next five years and expects to maintain strength in its business arms. Phibro surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 10.09%.
Let’s delve deeper.
Diversified Product Portfolio: We are optimistic about Phibro’s key animal health products, including Medicated Feed Additives (MFAs) and nutritional specialty products that enhance animal nutrition. Phibro’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine. The company’s nutritional product offerings, such as OmniGen-AF, are increasingly being used in the global dairy industry. The company also manufactures vaccines which protect animals from both viral and bacterial diseases. On the other hand, Phibro’s mineral nutrition products strengthen an animal’s diet and help maintain its optimal health.
Currently, the company is focused on expanding its footprint in the poultry, swine and cattle industries in both domestic and international markets.
Prospering Vaccine Business: Phibro’s focus on new developments and incremental registrations, along with growing volumes of existing nutritional specialties and vaccine technologies buoy our optimism. Phibro’s buyout of the assets of Israel-based developer and manufacturer of vaccines, KoVax, had widened its portfolio of aquaculture products.
The company’s pHi-Tech vaccination device had delivered impressive results during the initial trials. The device is now under trial and sold in various countries and is increasingly being remotely serviced.
Strong Q2 Results: We are upbeat about Phibro’s second-quarter fiscal 2021 results. Its strength in the Performance Products arm and nutritional specialty drove its top line in the second quarter despite the pandemic-led business challenges, which is impressive. Growth of dairy products in international and domestic markets amid the challenging business climate looks encouraging. Expansion of both margins raises optimism.
However, downsides might result from Phibro’s operation in a highly competitive industry which includes both global and regional competitors. Moreover, consolidation continues to rise in the animal health market, which might work in favor of Phibro’s competitors. Thus, the company faces a tough competitive scenario in nearly all the markets wherein it operates.
Further, during the second quarter of fiscal 2021, Animal Health segment’s MFA and other products fell significantly from the year-ago period owing to lower international demand, primarily in Asia and Latin America. Vaccine net sales also declined because of higher domestic vaccine sales, which were more than offset by lower international volumes due to unfavorable timing of customer orders and reduced demand.
Estimate Trend
Phibro has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings per share (“EPS”) has moved 4.4% north to $1.18.
The Zacks Consensus Estimate for third-quarter fiscal 2021 EPS is pegged at 33 cents, suggesting a fall of 13.2% from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks from the broader medical space are Hologic, Inc. HOLX, Hill-Rom Holdings, Inc. HRC and DENTSPLY SIRONA Inc. XRAY.
Hologic’s long-term earnings growth rate is estimated at 15.4%. The company presently sports a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hill-Rom’s long-term earnings growth rate is estimated at 7.3%. It currently carries a Zacks Rank #2.
DENTSPLY’s long-term earnings growth rate is estimated at 20%. The company presently sports a Zacks Rank #1.
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