Perrigo Beats on Q4 Earnings and Sales, Provides Guidance - Analyst Blog

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Perrigo Company 's ( PRGO ) fourth-quarter fiscal 2014 (ended Jun 28, 2014) earnings of $1.74 per share beat the Zacks Consensus Estimate of $1.55. Higher-than-expected revenues led to the earnings beat. Moreover, fourth quarter earnings were 11% above the year-ago figure.

Net sales in the quarter climbed 18% to $1.14 billion. Revenues increased $112 million due to the contribution from Elan Corporation (acquired in Dec 2013) and product acquisitions from Rosemont Pharma and Aspen. Newly launched products boosted revenues by $65 million. Revenues were above the Zacks Consensus Estimate of $1.09 billion. The earnings report found favor with the investors and the stock gained in early trading.

For fiscal 2014, Perrigo reported earnings of $6.39 per share up 14%. Perrigo had projected adjusted earnings per share for fiscal 2014 in the range of $6.15 to $6.30. The Zacks Consensus Estimate for fiscal 2014 was $6.20 per share. Net sales in fiscal 2014 climbed 15% to $4.06 billion, just above of the Zacks Consensus Estimate of $4.02 billion.

The Fourth Quarter in Detail

Perrigo reports revenues primarily from the following segments: Consumer HealthCare (CHC), Nutritionals, Rx Pharmaceuticals, Active Pharmaceutical Ingredients (API) and Specialty Sciences. The Specialty Sciences unit came into existence following the completion of the acquisition of Elan Corporation on Dec 18, 2013.

Consumer Healthcare: Perrigo reported CHC revenues of $607 million in the quarter, up 8%. Strong performance of existing products in the antacids and smoking cessation units boosted segmental sales by $52 million. Newly launched products also performed well in the quarter. Sales were boosted by $6 million due to the acquisition of OTC offerings from Aspen.

Segmental revenues were hurt by lower sales of existing offerings primarily in the contract manufacturing and animal health units. Adjusted gross margin for the segment declined to 33.9% from 36% a year ago. Margins were hurt by an under absorption of fixed production costs. Reduced sales of higher margin animal health products in the quarter also led to the contraction in margins.

Nutritional: Perrigo reported revenues of $145 million, down 3% year over year. Below par sales of products in the infant/toddler food and VMS units hurt segmental sales. Adjusted gross margin for the segment declined to 27.5% in the fourth quarter of fiscal 2014 from 28.9% a year ago. Margins contracted due to the timing of maintenance at the manufacturing facilities

Rx Pharmaceuticals: The Rx Pharmaceuticals segment performed encouragingly during the quarter with net sales improving 30% to $253 million. Sales of new products boosted segmental revenues by $35 million. Inclusion of results of Fera's ophthalmic product portfolio boosted sales by $20 million. Adjusted gross margin for the segment expanded to 60.4% from 56% a year ago. The increase was due to a favorable product mix and sales of higher margin products following the Fera transaction.

Active Pharmaceutical Ingredients: The company reported API sales of $33 million, down 21% from the prior-year quarter. Results were hurt by lower sales of existing products due to increased competition.

Specialty Sciences: Segmental revenues came in at $86 million due to royalties received by Perrigo on multiple sclerosis drug Tysabri from Biogen Idec ( BIIB ).

Others accounted for the remaining revenues.

We note that this is the third earnings report for the Dublin, Ireland-based Perrigo Company plc, formed following the Dec 2013 merger of Allegan, MI based Perrigo Company and Elan Corporation.

Fiscal 2015 View

Apart from announcing earnings results, Perrigo provided guidance for fiscal 2015. The company expects adjusted earnings per share in the range of $7.20 to $7.50, up 13% to 17% over fiscal 2014 levels. The Zacks Consensus Estimate of $7.47 per share is on the higher end of the guidance range.

Perrigo holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector include Mallinckrodt ( MNK ) and Akorn ( AKRX ). Both stocks sport a Zacks Rank #1 (Strong Buy).


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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 , Earnings , Stocks

Referenced Stocks: API , PRGO , MNK , BIIB , AKRX

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