Perrigo (PRGO) Up 2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Perrigo (PRGO). Shares have added about 2% 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.
Lags on Q3 Earnings & Sales
Perrigo reported adjusted earnings of 64 cents per share in third-quarter 2023, missing the Zacks Consensus Estimate of 65 cents. Earnings were up 14.3% year over year. The upside can be attributed to lower operating expenses incurred by the company during the quarter.
Net sales increased 2.2% year over year to $1.12 billion, missing the Zacks Consensus Estimate of $1.19 billion. The upside was driven by the acquisition of the U.S. & Canadian Good Start infant formula brand and favorable currency movement.
During the quarter, sales rose 2.1% on account of favorable currency movement. At constant currency (excluding foreign currency translation), sales rose 0.1%. Organic net sales (excluding the effects of acquisitions and divestitures and the impact of currency) were down 1.2% year over year.
Segment Discussion
CSCA: The segment’s net sales in the third quarter of 2023 came in at $703.5 million, down 2.6% year over year. The downside was caused by purposeful SKU prioritization actions to enhance margins as part of the company's Supply Chain Reinvention Program undertaken last year and lower net sales of legacy Nutrition products in the United States. Strategic pricing actions and new product sales partially offset the downside.
CSCI: The segment reported net sales of $420.3 million, up 11.2% from the year-ago period’s levels. Segment revenues benefited from strategic pricing actions, new product sales and favorable currency movement. At constant-currency (cc) rates, sales were up 5.2% year over year. Organically, sales increased 6.2%.
2023 Guidance
Perrigo lowered its financial guidance for 2023. Management now expects to report net sales growth in the range of 4-6%, down from the previously issued guidance of 7-11%.
Adjusted earnings per share are now expected to be between $2.50 and $2.60 (previously $2.50 to $2.70).
The adjusted tax rate is expected to be around 14% (previously 17%). Perrigo expects to record interest expenses of about $180 million (maintained).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.32% due to these changes.
VGM Scores
At this time, Perrigo has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Perrigo has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Perrigo belongs to the Zacks Medical - Products industry. Another stock from the same industry, Boston Scientific (BSX), has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Boston Scientific reported revenues of $3.53 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $0.50 for the same period compares with $0.43 a year ago.
For the current quarter, Boston Scientific is expected to post earnings of $0.51 per share, indicating a change of +13.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
Boston Scientific has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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