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Perrigo (PRGO) Q3 Earnings Beat, Revenues Miss, Stock Up

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Zacks Equity Research
·6 min read
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Perrigo Company plc PRGO reported third-quarter 2020 adjusted earnings of 93 cents per share, which beat the Zacks Consensus Estimate of 84 cents. However, the bottom line decreased 10.6% year over year. Earnings were hurt by the recall of albuterol sulfate in September 2020.

Net sales increased 1.3% year over year to $1.21 billion, slightly missing the Zacks Consensus Estimate of $1.23 billion. The year-over-year growth was driven by higher sales in the consumer self-care segment in the United States, partially offset by lower sales of the consumer self-care segment in ex-U.S. markets and the Rx segment. Organic net sales were down 0.4% year over year.

However, the company stated that better-than-expected recoveries were observed in both the consumer self-care international and Rx base businesses during the quarter. Moreover, sales in the branded self-care and generic prescription product categories improved to near pre-COVID-19 levels, following disruption in the second quarter.

Shares of Perrigo were up 3.1% during after-market trading hours on Nov 4, following the earnings release, presumably on better-than-expected recovery. The company’s stock has decreased 20.1% so far this year compared with the industry’s decline of 2.3%.

Segment Discussion

Perrigo now reports its results under the following segments — Consumer Self Care Americas (“CSCA”), Consumer Self Care International (“CSCI”), and Prescription Pharmaceuticals (“RX”).

CSCA: Net sales of the segment in the third quarter of 2020 came in at $664 million, up 7.3% year over year, driven by $24 million in sales from Dr. Fresh oral self-care products added with acquisition of oral care assets of high ridge brands in April, and higher sales of OTC and nutrition businesses. However, currency movements had a negative impact of $3 million. Net sales at CSCA increased approximately 4%, organically. Moreover, new product launches and channel shifting to e-Commerce benefited the segment.

CSCI: The segment reported net sales of $339 million, down 2.9% from the year-ago period. The decline in the CSCI segment was due to lower sales of cough and cold OTC brands, and skincare & personal hygiene. Divested businesses and discontinued products hurt sales by $15 million and $3 million, respectively. However, $12 million in favorable currency movements, higher sales from new products, XLS Forte Five weight management brand, and pain and VMS categories provided some respite. While COVID-19 benefited pain and VMS categories, it hurt sales in skincare & personal hygiene category. Organic sales decreased 2.7%.

Rx Segment: Net sales of the segment decreased 8.5% to $211 million. The downside can be attributed to albuterol sulfate recall and discontinued products. Excluding sales from albuterol sulfate and discontinued products from both current and year-ago period, Rx segment sales were down 1.2%, reflecting a faster-than-anticipated recovery in dermatology prescriptions compared to the second quarter of 2020.

2020 Guidance

Perrigo maintained its previous outlook for 2020. The company expects adjusted earnings in the range of $3.95 to $4.15 per share. It anticipates net sales to grow 6-7% year over year in 2020. Organic growth in net sales was expected to be approximately 3%.

Despite negative impact of COVID-19 related disruptions (12-15 cents per share), albuterol sulfate recall (14 cents per share) and Rosemont Rx business divestment (6 cents per share) on 2020 earnings, the company maintained its guidance reflecting better-than-expected recoveries across all segments. However, future waves of COVID-19 may lead to new restrictions, like in some European countries, which can hurt sales as well as earnings.

Key Business Development

In a separate press release, Perrigo stated that the Irish High Court ruled in favor of the Irish Office of the Revenue Commissioners in the judicial review of the tax liability case of almost $1.9 billion related to acquisition of Elan Pharma in 2013. Although no payment has to be made by Perrigo now, Irish Tax Appeals Commission will examine the liability notice as part of a separate challenge brought by Perrigo in December 2018. The company may appeal against the judicial review outcome in the Irish Court of Appeal or proceed to the Tax Appeals Commission for examination of the notice.

Perrigo Company plc Price, Consensus and EPS Surprise

Perrigo Company plc Price, Consensus and EPS Surprise
Perrigo Company plc Price, Consensus and EPS Surprise

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

Zacks Rank and Stocks to Consider

Currently, Perrigo is a Zacks Rank #5 (Strong Sell) stock.

Some stocks to consider from the biotech/drug sector include Emergent Biosolutions Inc. EBS, miRagen Therapeutics, Inc. MGEN and BioLineRx Ltd. BLRX. While Emergent sports a Zacks Rank #1 (Strong Buy), miRagen and BioLineRx carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Emergent Biosolutions’ earnings per share estimates have moved up from $6.17 to $8.42 for 2021 in the past 60 days. The company delivered an earnings surprise of 127.41%, on average, in the last four quarters. The stock has risen 82.2% so far this year.

Miragen Therapeutics’ loss per share estimates narrowed from 51 cents to 42 cents for 2021 in the past 60 days. The stock has risen 168.8% so far this year.

BioLineRx loss per share estimates have narrowed from $1.44 to $1.36 for 2021 in the past 60 days. The company delivered an earnings surprise of 10.36%, on average, in the last four quarters. The stock has risen 19.1% so far this year.

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