Phibro's (PAHC) Sales Hurt by Rising Costs, FX Headwind
Phibro Animal Health's PAHC business continues to be dented by macroeconomic headwind, mounting expenses and unfavorable currency movement. Moreover, a tough competitive scenario continues to pose a threat. The stock carries a Zacks Rank #4 (Sell).
During the third quarter of fiscal 2023, Phibro posted a year-over-year decline in earnings. The Mineral Nutrition Products segment showed signals of recessionary pressure, with customers seeking to reduce purchases and lower inventory. Across the Performance Products segment, the demand for copper-based products and personal care products declined during the quarter, affecting the segment’s revenues.
Higher selling, general and administrative expenses negatively weighed on the company’s operating margin in the quarter under review.
Macroeconomic and operational challenges continue to dent the profitability of Phibro. In the fiscal third quarter, supply chain disruptions were less common. In addition, sustained inflation is keeping input cost high, which is reflected in Phibro’s financial results as lower margins and higher inventory carrying values.
Phibro Animal Health Corporation Price
Phibro Animal Health Corporation price | Phibro Animal Health Corporation Quote
Phibro conducts operations globally, including transactions in a variety of currencies. Although a portion of Phibro’s revenues is denominated in various currencies, the selling prices of the majority of its products outside the United States are referenced in U.S. dollars. As a result, Phibro’s revenues are not directly affected by currency movements.
Further, Phibro is engaged in highly competitive industries. With respect to its major products, it thus faces threat from a substantial number of global and regional competitors. Phibro’s competitive position is based principally on its product registrations, customer service and support, breadth of product line, product quality, manufacturing technology, facility location, and product prices.
Some of the company’s principal competitors, with greater financial R&D, production and other resources, include Bayer AG, CevaSantéAnimale, Boehringer Ingelheim International GMBH, Eli Lilly and Company (Elanco Animal Health), Huvepharma Inc., Lallemand Inc., Merck & Co., Inc. (Merck Animal Health and MSD Animal Health), Pharmgate LLC, Southeastern Minerals, Inc., Virbac and Zoetis Inc.
In the past year, Phibro has underperformed its industry. The stock has declined 22.6% against the industry’s 3.2% rise.
On a positive note, Phibro exited the fiscal third quarter of 2023 with better-than-expected revenues. Year-to-date sales growth was strong, driven by Animal Health. It was the eighth consecutive quarter of year-over-year sales growth in each of the three major product categories within Animal Health. In particular, vaccine net sales improvement was driven by increased demand and new product launches in Latin America.
The development pipeline for Companion Animal continues to progress. Given the strength of Phibro’s current portfolio of products and the anticipated demand for products in the pipeline, the company maintains a bullish approach to its business.
Phibro’s existing operations and established sales, marketing and distribution network in over 75 countries provide it ample scope to take advantage of global growth opportunities. Outside the United States, Phibro’s global footprint extends to key high-growth regions (countries where the livestock production growth rate is expected to be higher than the average growth rate), including Brazil and other countries in South America, the Asia Pacific, China, India, Russia and former CIS countries, Mexico, Turkey, Australia, Canada, South Africa and other countries in Africa.
Key Picks
Some better-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Patterson Companies, Inc. PDCO and Integer Holdings Corporation ITGR.
Penumbra, carrying a Zacks Rank of 1 (Strong Buy), reported second-quarter 2023 adjusted EPS of 43 cents, beating the Zacks Consensus Estimate by 53.6%. Revenues of $261.5 million outpaced the consensus mark by 3.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra has a 2024 estimated growth rate of 57.9%. PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 94.2%.
Patterson Companies has a Zacks Rank of 1. PDCO has an estimated long-term growth rate of 9.2%.
Patterson Companies’ earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 4.5%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Patterson Companies, Inc. (PDCO) : Free Stock Analysis Report
Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
