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Phibro (PAHC) Down 2.7% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Phibro Animal Health Corporation PAHC. Shares have lost about 2.7% in that time frame, outperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.

Recent Earnings

Phibro Animal Health Corporation reported adjusted earnings per share (EPS) of 39 cents in the fourth quarter of fiscal 2017, up 21.9% year over year. Adjusted EPS also surpassed the Zacks Consensus Estimate of 35 cents. According to the company, the year-over-year improvement was primarily driven by a higher gross profit ratio, reduced interest expense and a lower effective income tax rate.        

Including one-time items, the company reported EPS of 38 cents, in line with the year-ago quarter.

Full-year adjusted earnings came in at $1.51, an increase of 5.6% from year-ago period. Also, the figure surpassed the Zacks Consensus Estimate of $1.45. 

Net Sales

In the reported quarter, Phibro’s net sales were $194.8 million, up 2.9% year over year. The improvement was driven by sales growth in the Animal Health, Mineral Nutrition segment and Performance Products.

Fiscal 2017 registered net sales of $764.3 million, up 12.8% from a year ago. Also, revenues beat the Zacks Consensus Estimate of $761.52 million.

Sales by Segments

Net sales at the Animal Health segment increased 2% to $128.6 million in the reported quarter on the back of volume increases in the nutritional specialty and vaccine product groups within the segment. While nutritional specialty products grew 14%, sales from vaccines increased 8%, principally on volume growth of products for poultry and swine industries.

However, sales at Medicated feed additives (MFAs) and Other fell 3% primarily due to volume declines.

Domestic net sales of MFAs and Other declined $7.4 million due to reduced volumes of medically important antimicrobials. International net sales increased by $5.2 million, driven by growth in the Asia-Pacific region, which is partially offset by declines in Brazil due to economic conditions.

Net sales at the Mineral Nutrition segment increased 5% to $52.8 million on increased volumes and higher average selling prices resulting from underlying raw material commodity price increase.  

Net sales at the Performance Products segment increased 6% to $13.4 million. This was driven by higher volumes of copper-based products and personal care ingredients and increased average selling prices of copper-based products. However, the increase was partially offset by lower average selling prices of personal care ingredients.

Operational Update

Phibro’s fiscal fourth-quarter gross profit increased 5.9% year over year to $63.1 million. The gross margin expanded 89 basis points (bps) to 32.4%.

Selling, general and administrative expenses rose 0.3% to $39.6 million. Operating margin expanded 144 bps year over year to 12.1% in the quarter.

Financial Update                                                             

Year to date, Phibro generated $98.4 million in cash flow from operations compared with $37.2 million in the year-ago period. Capital expenditure amounted to $20.9 million in this period, reflecting a reduction from $36.4 million in fiscal 2016.

FY18 Outlook

Phibro provided its fiscal 2018 guidance. The company currently expects to generate net sales of $765-$790 million. The current Zacks Consensus Estimate of $777.1 million falls within the guided range.

Phibro provided its adjusted EPS guidance in the range of $1.55–$1.61. The current Zacks Consensus Estimate of $1.55 is at the lower end of the company's guided range.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Phibro Animal Health Corporation Price and Consensus

Phibro Animal Health Corporation Price and Consensus | Phibro Animal Health Corporation Quote

VGM Scores

At this time, Phibro's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a F. The stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value.

Outlook

Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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