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Why Is Phibro (PAHC) Down 13.3% Since Last Earnings Report?

Zacks Equity Research
MGIC (MTG) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

It has been about a month since the last earnings report for Phibro Animal Health (PAHC). Shares have lost about 13.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Phibro Sees Y/Y Rise in Earnings & Revenues in Q4

Phibro reported adjusted earnings per share (EPS) of 46 cents in the fourth quarter of fiscal 2018, up 17.9% 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 higher gross profit, reduced interest expenses as well as a drop in effective income tax rate.

Reported EPS of 55 cents was up 44.7% from a year ago.

Full-year adjusted EPS came in at $1.74, up from the year-ago $1.51. Also, the figure beat the Zacks Consensus Estimate of $1.71.

Net Sales

In the reported quarter, net sales totaled $211.8 million, up 8.7% year over year. The improvement was driven by sales growth at the Animal Health, Mineral Nutrition and Performance Products segments.

Fiscal 2018 revenues of $820 million were up 7.3% from the year-ago figure. The figure also surpassed the Zacks Consensus Estimate of $817.2 million.

Sales by Segments

Net sales at the Animal Health segment increased 7% to $137.7 million in the reported quarter on volume increase at Nutritional specialty and Vaccine product groups within the segment. Nutritional specialty products grew less than 1%, principally on volume growth of products for poultry which was largely offset by decreased sales to the dairy sector which is grappling with weak conditions. Further, sales from Vaccines increased 7%, majorly on global volume growth.

Moreover, sales at Medicated feed additives (MFAs) and other grew 9% primarily on strength in international business. International net sales were driven by growth in most regions, including benefits from a recent buyout and additional penetration in the cattle sector. Domestic net sales at MFAs and Other remained flat year over year.

Net sales at the Mineral Nutrition segment rose 14% to $60.3 million on higher average selling prices resulting from an increase in underlying raw material commodity price.

Net sales at the Performance Products segment rose 3% to $13.8 million on higher average selling prices of copper-based products and rising volumes of personal care ingredients. However, this growth was partially offset by reduced volumes of copper-based products.

Operational Update

Phibro’s fourth-quarter gross profit increased 7% year over year to $67.5 million. However, gross margin contracted 50 basis points (bps) to 31.9%.

Selling, general and administrative expenses rose 5% to $41.4 million. However, operating margin expanded 20 bps to 12.3% in the quarter.

Financial Update                                                             

Phibro generated $70 million of cash flow from operations in fiscal 2018, down from the year-ago $98.4 million. Capital expenditure amounted to $18.5 million in this period, reflecting a reduction from $20.9 million in the year-ago period.

FY19 View Issued

Phibro has issued its guidance for fiscal 2019. The company expects to generate net sales of $850-$875 million. The current Zacks Consensus Estimate of $851.3 million is within the guided range.

Phibro projects adjusted EPS in the $1.72-$1.77 band. The current Zacks Consensus Estimate of $1.88 is above the company's guided range.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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