Phibro (PAHC) Q2 Earnings and Revenues Top, Margins Down
Phibro Animal Health PAHC delivered adjusted earnings per share (EPS) of 33 cents in the second quarter of fiscal 2024, down 2.9% from the year-ago quarter’s adjusted figure. However, the metric beat the Zacks Consensus Estimate by 22.2%.
Without adjustments, the GAAP EPS in the fiscal second quarter was 3 cents compared with 18 cents in the year-ago quarter.
Net Sales
In the quarter under review, net sales totaled $249.9 million, a 2.2% increase from the year-ago quarter. The figure also topped the Zacks Consensus Estimate by 2.9%.
Phibro Animal Health Corporation Price, Consensus and EPS Surprise
Phibro Animal Health Corporation price-consensus-eps-surprise-chart | Phibro Animal Health Corporation Quote
Segmental Sales Breakup
The company conducts its operations via three segments — Animal Health, Mineral Nutrition and Performance Products.
In the second quarter of fiscal 2024, Animal Health’s net sales increased 5.7% to $173.1 million. The figure surpassed our model’s projected revenues of $161 million.
Within the segment, net sales of medicated feed additives (MFAs) and others reflected 4.8% year-over-year growth. The uptick was driven by the increased demand for MFAs in the international regions and processing aids used in the ethanol fermentation industry.
Within Animal Health, nutritional specialty product sales decreased 6%, primarily due to lower domestic dairy demand. However, net vaccine sales showed a year-over-year rise of 31%, mostly due to poultry product introductions in Latin America, along with an increase in domestic demand.
Net sales in the Mineral Nutrition segment fell 0.5% year over year to $61.3 million due to declines in average selling prices and some reduction in sales volumes. Our model projected the segment’s revenues to be $62.5 million.
Net sales in the Performance Products segment fell 19.3% to $15.5 million as a result of the decreased demand for personal care product ingredients and industrial chemicals. Our model projected the segment to report $16.9 million in revenues.
Margins
Phibro’s fiscal second-quarter gross profit rose 1.7% year over year to $78.6 million. However, the gross margin contracted 15 basis points (bps) to 31.5% on a 2.4% rise in the cost of goods sold.
SG&A expenses in the reported quarter were $62.9 million, up 2.3% from the year-ago quarter’s levels. The operating profit fell 0.6% year over year to $15.7 million, while the operating margin contracted 18 bps to 6.3% in the quarter under review.
Financial Update
The company exited the second quarter of fiscal 2024 with cash and short-term investments of $92.5 million compared with $91.2 million at the end of the fiscal first quarter.
Cumulative net cash provided by operating activities at the end of the second quarter was $47.8 million compared with $16.2 million at the end of the first quarter.
Guidance
Phibro reaffirmed its outlook for fiscal 2024.
The company expects net sales between $980 million and $1.02 billion (unchanged). The Zacks Consensus Estimate for the metric is pegged at $979.8 million.
Adjusted EPS is expected in the range of $1.04-$1.16 (unchanged). The Zacks Consensus Estimate is pegged at $1.07.
Our Take
Phibro exited the second quarter of fiscal 2024 with better-than-expected revenues and earnings. Consistent strong top-line growth in the core Animal Health segment is highly encouraging. Key metrics in this segment benefited from the growth of high-value new product introductions in the vaccine product line.
Meanwhile, the bottom line witnessed a year-over-year decline in the quarter. The contraction of both the gross and adjusted operating margins is discouraging. Phibro anticipates a significant improvement in the Mineral Nutrition and Performance Products segments in the second half of the year as it works through inventory imbalances and a rebound in demand.
Zacks Rank & Key Picks
Phibro currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Stryker Corporation SYK, Boston Scientific BSX and Cardinal Health CAH.
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Boston Scientific, carrying a Zacks Rank #2, reported a fourth-quarter 2024 adjusted EPS of 55 cents, which beat the Zacks Consensus Estimate by 7.8%. Revenues of $3.73 billion outpaced the Zacks Consensus Estimate by 3.8%.
BSX has a long-term estimated earnings growth rate of 12.7%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 7.4%.
Cardinal Health reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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