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Perrigo (PRGO) Surpasses Q1 Earnings and Revenue Estimates

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Zacks Equity Research
·5 min read
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Perrigo Company plc PRGO reported first-quarter 2019 adjusted earnings of $1.14 per share, which beat the Zacks Consensus Estimate of $1.09. The bottom line increased 6.5% year over year.

Net sales increased 14.2% year over year to $1.34 billion, beating the Zacks Consensus Estimate of $1.32 billion by a slight margin. The year-over-year growth was driven by addition of products from the recently closed Ranir acquisition and higher demand for existing products. Higher demand for consumer products and sales of new products were partially offset by a loss of $11 million in sales from discontinued products and pricing pressure in Prescription Pharmaceuticals segment. Sales rose 17.6% excluding exited businesses and the impact of foreign currency movement. Organic net sales (excludes sales of Ranir products, exited businesses and the impact of currency) were up 11% year over year.

Moreover, the company’s business received a boost with increase in demand for self-care products and drugs during March due to stockpiling by customers amid COVID-19 pandemic. The company estimates that this additional demand has added $90 million to $110 million to net sales

Shares of Perrigo have increased 5.1% so far this year against the industry’s decline of 6.1%.

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”). In the first quarter of 2019, the company initiated a process to transform itself from a healthcare to a consumer self-care company.

Last year, the company acquired Ranir Global Holdings LLC, the global leader in private label oral self-care market, as part of its transformation into a self-care company, which significantly boosted revenues for CSCA and CSCI segments.

CSCA: Net sales of the segment in the first quarter of 2019 came in at $701 million, up 20.4% year over year, driven by higher sales of over-the-counter (“OTC”) and nutrition businesses, increased demand related to COVID-19 and $55 million of net sales from products added after the Ranir acquisition. Excluding net sales from exited businesses, additional sales from Ranir’s products and the impact of foreign currency movement, net sales at CSCA increased approximately 15%.

The company divested its Animal Health business for $185 million in cash to pet medication and wellness company, PetIQ PETQ, in 2019.Excluding the exited animal health business, CSCA net sales were up 24.8%.

CSCI: The segment reported net sales of $383 million, up 9.1% from the year-ago period. The growth was driven by new product sales of $30 million, especially weight loss product XLS Forte 5, and $21 million of net sales from Ranir's products, as well as higher brand OTC sales attributed to COVID-19 in the United Kingdom. Excluding net sales from Ranir’s products and the impact of foreign currency movement and exited businesses, sales increased 8.1%.

Rx Segment: Net sales of the segment increased 6.5% to $258 million. The upside can be attributed to new product sales of $58 million, led by the launch of generic version of Teva’s inhaler — ProAir HFA — partially offset by pricing pressure associated with testosterone gel. The company lost $5 million in sales from discontinued products.

2020 Guidance

Perrigo did not provide an updated outlook for 2020 based on the current volatility and uncertainty associated with the COVID-19 pandemic. The potential impact on demand and ability to manufacture and supply product also remains uncertain.

On its fourth-quarter earnings call, Perrigo had guided adjusted earnings in the range of $3.95 to $4.15 per share. It anticipated net sales to grow 6-7% year over year in 2020. Organic growth in net sales was expected to be approximately 3%.

Our Take

Perrigo reported encouraging first-quarter results with earnings and sales beating estimates. Sales rose across all segments. The company’s transformation initiatives seem to support top- and bottom-line growth. Revenues increased sequentially every quarter in the past few quarters.

Moreover, the company’s Rx segment returned to growth in 2019 after a weak 2018. The growth trend is expected to continue in 2020. However, pricing pressure across all segments remains a concern. Meanwhile, uncertainty related to COVID-19 is a major concern, which is likely to continue in the second quarter.

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 #3 (Hold) stock.

A couple of better-ranked stocks to consider from the biotech sector include Seattle Genetics, Inc. SGEN and Ultragenyx Pharmaceutical Inc. RARE, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Seattle Genetics’ loss per share estimates have narrowed from $2.95 to $2.87 for 2020 in the past 30 days. The company’s average four-quarter positive earnings surprise is 11.66. The stock is up 20.9% so far this year.

Ultragenyx’s loss per share estimates have narrowed from $6.17 to $6.03 for 2020 in the past 30 days. The company’s stock has surged 49% so far this year.

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