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A month has gone by since the last earnings report for Perrigo (PRGO). Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Perrigo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Perrigo Q2 Earnings Surpass Estimates, Revenues Miss
Perrigo reported second-quarter 2020 adjusted earnings of $1.03 per share, which beat the Zacks Consensus Estimate of 87 cents. The bottom line increased 19.8% year over year.
Net sales increased 6.1% year over year to $1.22 billion, missing the Zacks Consensus Estimate of $1.23 billion by a slight margin. The year-over-year growth was driven by the addition of products from the recently closed Ranir acquisition, launch of generic albuterol sulfate and higher sales of OTC products. These were partially offset by a loss of $11 million in sales from discontinued products, $26 million from divested businesses and adverse impact of COVID-19 on international ales. Sales rose 10% 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 2.6% year over year.
Moreover, the company’s business received a boost with lower-than-expected consumer pantry de-load in U.S. OTC market. Please note that demand for self-care products and drugs had increased in March due to stockpiling by customers amid COVID-19 pandemic.
CSCA: Net sales of the segment in the second quarter of 2020 came in at $628 million, up 7.8% year over year, driven by higher sales of OTC and nutrition businesses, increased demand related to COVID-19 and $63 million of net sales from oral self-care portfolio. These were partially offset by de-prioritization of certain products amid COVID-19 and normal pricing pressure on specific products. Net sales at CSCA increased approximately 1.6%, organically. The company lost sales of $22 million during the quarter from the exited animal health business.
CSCI: The segment reported net sales of $231 million, down 2% from the year-ago period. The decline was due to lower category sales owing to COVID-19 related bans and consumer pantry de-stocking. These were partially offset by new product sales of $23 million, especially weight loss product XLS Forte 5, and $19 million of net sales from Ranir's products. Organic sales decreased 3%.
Rx Segment: Net sales of the segment increased 12.9% to $270 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 lower dermatology volumes. The company lost $9 million in sales from discontinued products.
Perrigo maintained its outlook for 2020 that it had provided on its fourth-quarter 2019 earnings call.
Perrigo 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 is expected to be approximately 3%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -8.63% due to these changes.
At this time, Perrigo has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Perrigo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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