Phibro Animal Health Corporation PAHC has been progressing well with its steady foray into overseas markets and expansion of product portfolio. However, a tough competitive landscape and foreign exchange uncertainties are likely to offset the positives to some extent.
This $1.03-billion worth animal health and mineral nutrition company expects an earnings growth rate of 3.2% for the next five years. Also, the company has a trailing four-quarter negative earnings surprise of 8.2%, on average.
In the past three months, the company’s shares have outperformed the industry. The stock has rallied 18.3% compared with the industry’s 4.9% growth.
Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold).
Diversified Product Portfolio: Phibro’s key animal health products, including MFAs and nutritional specialty products, are expected to continue driving growth in the long term. The company’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine and regarded as one of the leading MFA products for livestock. Similarly, the company’s nutritional product offerings, such as OmniGen-AF, are being used increasingly in the global dairy industry.
Foray in Emerging Markets: Phibro’s existing operations and established sales, marketing and distribution network in more than 65 countries provide it ample scope to take advantage of global growth opportunities. Outside the United States, the company’s global footprint extends to key high-growth regions, including South America, the Asia Pacific, Russia and former CIS countries, Mexico, Turkey, Australia, Canada and South Africa.
Prospering Vaccine Business: Lately, Phibro has been inking deals with various companies to bolster its vaccine business. In December 2018, the company bought the assets of KoVax, an Israel-based developer and manufacturer of vaccines for the international aquaculture market. The buyout has widened Phibro’s portfolio of aquaculture products.
However, a few factors are affecting the company’s growth.
Competitive Headwinds:Phibro faces tough competition from key market rivals like Bayer AG, Ceva Santé Animale, Boehringer Ingelheim International GMBH, Eli Lilly and Company (Elanco Animal Health), Huvepharma Inc., Lallemand Inc., Merck & Co., Inc. (Merck Animal Health and MSD Animal Health), Pharmgate LLC, Southeastern Minerals, Inc., Virbac and Zoetis Inc.
Foreign Exchange Uncertainties: Phibro conducts operations globally, which entails transactions in various currencies. The company is subject to currency risk to the extent that its costs are denominated in currencies other than those in which the company earns revenues. It is also exposed to changes in the cost of goods sold resulting from currency movements and may not be able to adjust its selling prices to offset such movements.
Which Way Are Estimates Treading?
For the first quarter of fiscal 2020, the Zacks Consensus Estimate is pegged at 28 cents, calling for a 31.1% decline from the prior-year reported number.
The Zacks Consensus Estimate for fiscal 2020 earnings is pegged at $1.11 per share, suggesting a 27.5% fall from the year-ago quarter’s reported figure. The same for revenues stands at $833.6 million, implying a 0.7% improvement from the year-earlier quarter’s reported number.
Stocks Worth a Look
A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, West Pharmaceutical Services WST and Omnicell OMCL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics has a projected long-term earnings growth rate of 13.5%.
West Pharmaceutical Services has an expected long-term earnings growth rate of 14%.
Omnicell has a long-term earnings growth rate of 12.5%.
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Click to get this free report Omnicell, Inc. (OMCL) : Free Stock Analysis Report Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report Haemonetics Corporation (HAE) : Free Stock Analysis Report West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research