A month has gone by since the last earnings report for Phibro Animal Health Corporation PAHC. Shares have added about 10.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is PAHC 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.
Phibro Animal Health reported adjusted earnings per share (EPS) of 46 cents in the third quarter of fiscal 2018, up 24.3% year over year. Adjusted EPS surpassed the Zacks Consensus Estimate of 44 cents. According to the company, the year-over-year improvement was primarily driven by a higher gross profit, reduced interest expenses and a lower effective income tax rate.
Reported EPS of 49 cents was down 16.9% from the year-ago quarter on lower net income.
In the reported quarter, net sales totaled $208.9 million, up 10% year over year. The improvement was driven by sales growth at the Animal Health, Mineral Nutrition and Performance Products segments.
Sales by Segments
Net sales at the Animal Health segment increased 9% to $132.3 million in the reported quarter on volume increase at Nutritional specialty and Vaccine product groups within the segment.
While Nutritional specialty products grew 14%, principally on volume growth of products for poultry and dairy industries. Further, sales from Vaccines increased 6%, majorly on global volume growth.
Moreover, sales at Medicated feed additives (MFAs) and Other grew 9% primarily on strength in international business.
Domestic net sales at MFAs and Other rose $1 million on volume growth of certain products. International net sales increased by $5.6 million, driven by growth in most regions, including benefits from a recent buyout and additional penetration in the cattle sector.
Net sales at the Mineral Nutrition segment increased 10% to $62.9 million on higher average selling prices resulting from an increase in underlying raw material commodity price.
Net sales at the Performance Products segment rose 17% to $13.7 million on higher average selling prices and volumes of copper-based products.
Phibro’s third-quarter gross profit increased 14% year over year to $69.1 million. The gross margin expanded 120 basis points (bps) to 33.1%.
Selling, general and administrative expenses rose 39.2% to $42.6 million. Operating margin contracted 310 bps to 12.7% in the quarter.
Year to date, Phibro generated $59.9 million in cash flow from operations compared with $84.8 million a year ago. Capital expenditure amounted to $13 million in this period, reflecting a reduction from $15.4 million in the year-ago period.
FY18 View Reaffirmed
Phibro has reaffirmed its guidance for fiscal 2018. The company expects to generate net sales of $800-$825 million. The current Zacks Consensus Estimate of $811 million falls within the guided range.
Phibro projects adjusted EPS in the $1.66-$1.71 band. The current Zacks Consensus Estimate of $1.69 is also within the company's guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter
At this time, PAHC has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value and to a lesser degree momentum.
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, PAHC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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