Earnings Beat at Perrigo - Analyst Blog


Perrigo Company 's ( PRGO ) third quarter fiscal 2012 (ended March 31, 2012) adjusted earnings of $1.41 handsomely beat the Zacks Consensus Estimate of $1.21 per share. Third quarter earnings increased 31.8% from the year-ago period. Earnings were boosted by higher revenues.

Net sales in the reported quarter climbed 12.5% to $778 million. Revenues were aided by the inclusion of $70 million of net sales from Paddock Laboratories (acquired by Perrigo in 2011) and CanAm Care (whose assets were acquired by Perrigo in January 2012).

Moreover, newly launched products boosted sales by $64 million in the third quarter of fiscal 2012. However, revenues fell short of the Zacks Consensus Estimate of $825 million.

Quarter in Detail

Perrigo reports revenue from the following five segments: Consumer HealthCare (CHC), Nutritionals, Rx Pharmaceuticals, Active Pharmaceutical Ingredients (API) and other.

Consumer Healthcare : Perrigo reported CHC revenue of $449 million in the third quarter, up 6% over the prior year. The revenue growth was driven by the new product sales, primarily in the cough/cold and dermatological units. Segmental sales were also aided by the inclusion of results of CanAm Care.

Nutritional : Perrigo reported Nutritional quarterly revenue of $118 million, which declined 4.8% from the prior-year quarter as sales of infant formula and vitamin, mineral and supplement (VMS) products declined. Infant formula sales were impacted by a decline in birth rates in the U.S.

Moreover, competitor product recalls which benefited the prior year quarter were missing in the reported quarter, thus pulling down infant formula revenues. We note that Perrigo has benefited from product recalls by competitors such as Johnson & Johnson ( JNJ ) in the past few quarters. VMS sales were negatively impacted by intense competition.

Rx Pharmaceuticals : The Rx Pharmaceuticals segment performed impressively with net sales climbing 84% to $156 million in third quarter of fiscal 2012. The huge increase was primarily driven by the acquisition of Paddock Laboratories.

Active Pharmaceutical Ingredients (API): The company reported API sales of $37 million, down approximately 10% over the prior year. Reduced demand coupled with pricing pressures negatively impacted net sales of the segment during the reported quarter.

Other : Segmental sales improved 12% to $19 million.

During the third quarter of fiscal 2012, gross margin at Perrigo climbed 190 basis points to 37.6% on an adjusted basis. Adjusted operating expenses climbed 9% to $121.1 million in the reported quarter.

Fiscal 2012 Guidance Upped

Apart from announcing financial results, Perrigo upped its earnings projection for fiscal 2012. The company now expects to end fiscal 2012 with adjusted earnings per share in the range of $4.90-$5.00 (old guidance: $4.70-$4.80). The Zacks Consensus Estimate for fiscal 2012 currently stands at $4.78 per share.

Our Recommendation

We currently have a Neutral recommendation on Perrigo. The stock carries a Zacks #3 Rank (short-term Hold rating).

We believe Perrigo has a sustainable and diversified product portfolio. The company's strong position in the brand OTC pharmaceutical market coupled with the growing generics and API businesses are expected to drive growth in the coming quarters. We are also impressed by Perrigo's strong pipeline.

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
PERRIGO COMPANY (PRGO): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: API , CHC , JNJ , PRGO

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com