Why Is Phibro (PAHC) Down 10.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Phibro Animal Health (PAHC). Shares have lost about 10.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Phibro due for a breakout? 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.
Phibro Q4 Earnings Miss Estimates, Gross Margin Dips
Phibro Animal Health Corporation delivered adjusted earnings per share of 38 cents for the fourth quarter of fiscal 2023, up 5.6% from the year-ago quarter’s adjusted figure. The metric however missed the Zacks Consensus Estimate by 5%.
Without adjustments, GAAP earnings per share in the fiscal fourth quarter was 28 cents, up 54% from the year-ago quarter’s figure. The company reported full-year adjusted earnings per share of $1.21, reflecting an 8% decline from fiscal 2022.
Net Sales
In the quarter under review, net sales totaled $255 million, a 0.1% dip from the year-ago quarter. The figure missed the Zacks Consensus Estimate by 0.7%. For fiscal 2023, the company reported net sales of $977.9 million, up 4% from the year-ago fiscal.
Segmental Sales Break-Up
In the fiscal fourth quarter, Animal Health’s net sales increased 6% to $176.8 million. Within the segment, net sales of medicated feed additives (MFAs) and others reflected 2% year-over-year growth. The uptick was driven by increased demand for the company’s processing aids used in the ethanol fermentation industry.
Within Animal Health, nutritional specialty product sales rose 5%, primarily on higher average selling prices and an increase in microbial products.Also, net vaccine sales showed a year-over-year rise of 25% on an increase in domestic and international demand, along with new product launches in Latin America.
Our model projected a 2.2% year-over-year rise in Animal Health business in the fiscal fourth quarter.
Net sales in the Mineral Nutrition segment fell 16% year over year to $58.4 million due to a decline in the demand for trace minerals, partially offset by higher average selling prices. We expected this business to decline 1% on a year-over-year basis in the fiscal fourth quarter.
Net sales in the Performance Products segment rose 3% to $19.9 million, increased demand and higher average selling prices for copper-related products. Our model projected a 0.2% year-over-year rise in the Performance Products business in the fiscal fourth quarter.
Margins
Phibro’s fiscal fourth-quarter gross profit fell 2.4% year over year to $76.6 million. The gross margin contracted 71 basis points (bps) to 30% on a 0.9% rise in the cost of goods sold to $170.1 million.
Selling, general and administrative expenses in the reported quarter were $52.9 million, down 4.7% from the year-ago quarter’s levels. Operating profit rose 3% year over year to $23.7 million and operating margin expanded 29 bps to 9.3% in the quarter under review.
Financial Update
The company exited the fiscal with cash and short-term investments of $248 million compared with $192 million at the end of third-quarter fiscal 2023. Cumulative net cash provided by operating activities at the end of the fourth quarter was $13.3 million compared with $31.6 million a year ago.
Guidance
Phibro provided its fiscal 2024 guidance. The company expects net sales between $1 billion and $1.05 billion. The Zacks Consensus Estimate for the metric is pegged at $1.01 billion. Adjusted earnings per share is expected in the range of $1.12-$1.27. The Zacks Consensus Estimate for the same is pegged at $1.32.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -12.68% due to these changes.
VGM Scores
At this time, Phibro has a nice Growth Score of B, though it is lagging a lot 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 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 Phibro has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report
