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Why Is Perrigo (PRGO) Up 7.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Perrigo (PRGO). Shares have added about 7.1% in that time frame, outperforming 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 drivers.

Perrigo Q2 Earnings & Sales Miss Estimates

Perrigo reported second-quarter 2021 adjusted earnings of 50 cents per share, which missed the Zacks Consensus Estimate of 61 cents. Earnings decreased 15.3% year over year.

Net sales increased 3.4% year over year to $981 million but missed the Zacks Consensus Estimate of $1.02 billion. The year-over-year increase was driven by growth across most businesses and favorable currency movements, partially offset by weak cough/cold season amid the pandemic hurting OTC products. Organic net sales were up 0.5% year over year.

Segment Discussion

CSCA: Net sales of the segment in the second quarter of 2021 came in at $622 million, down 0.9% year-over-year. Sales decreased due to historically weak cough/cold season and lower year over year retail inventories partially offset by growth in OTC market and Skin & Personal Hygiene category, and new product sales.

Net sales at CSCA decreased 1.4%, organically.

CSCI: The segment reported net sales of $359 million, up 11.7% from the year-ago period. Sales were driven by new or recently acquired product sales and favorable currency movements, partially offset by historically weak cough/cold season and lower sales in Skincare & Personal Hygiene category. Divested businesses hurt sales by $14 million. Organic sales increased 4.3%.

2021 Guidance Intact

Despite weak second quarter results, Perrigo maintained its previous guidance for 2021 on the back of anticipated strong recovery in consumer demand in the second half. The company expects to deliver organic net sales growth of 3% in 2021. It expects adjusted earnings to increase approximately 7% and be in the range of $2.50 to $2.70. However, it now expects its earnings to be toward the lower end of the range due to rising input costs.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Perrigo has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Perrigo has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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