Technology

Perrigo (PRGO) Down 2.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Perrigo (PRGO). Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Perrigo 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 drivers.

Perrigo Q4 Earnings Miss, Sales Beat

Perrigo reported fourth-quarter 2018 adjusted earnings of 97 cents per share, which missed the Zacks Consensus Estimate of 98 cents. The bottom line also decreased 24.2% year over year.

Net sales declined 6.9% year over year to $1.2 billion but outpaced the Zacks Consensus Estimate of $1.18 billion. The year-over-year decline was mainly due to lower sales volume in the Rx segment. Sales of $51 million from new products were partially offset by a loss of $16 million in sales of/from discontinued products.

Segment Discussion

Perrigo reports under three segments: Consumer Health Care Americas (“CHCA”), Consumer Healthcare International (“CHCI”) and Prescription Pharmaceuticals (“RX”).

CHCA:  CHCA net sales in the fourth quarter of 2018 came in at $617 million, down 4.1% year over year. Strong performance of smoking cessation and analgesics was more than offset by lower net sales in the animal health business and nutrition categories. New product sales of $10 million were completely offset by lost sales from discontinued products. Excluding animal health category, sales decreased 1.9% organically.

CHCI: CHCI segment reported net sales of $356 million, down 4.9% from the year-ago period. On a constant-currency basis, the metric decreased 0.5%. Excluding the sales of $2 million from the exited Russian and unprofitable distribution businesses in 2017 and unfavorable foreign currency movements of $10 million, net sales remained almost flat.  Net sales of diagnostics and analgesics categories and new product sales of $10 million were mostly offset by lower sales in lifestyle and cough cold category. The company lost sales of $2 million from discontinued products.

RX:  This segment’s net sales declined 14.9% to $222 million on a reported basis as well as on a constant-currency basis. The downside can be attributed to several industry-based factors including pricing pressure and supply constraints for a few products.

While new product sales of $22 million contributed to the top line, the company lost sales of $4 million from discontinued products.

2018 Results

Perrigo recorded full-year sales of $4.7 billion, down 4.3% on a year-over-year basis. The reported figure includes new product sales of $170 million, partially offset by discontinued products of $66 million. Currency movements resulted in a loss of $34 million in sales. The company’s adjusted loss for the period was $4.55 per share, lower than the year-ago loss of $4.93 per share.

The company announced that it will provide an update on portfolio reconfiguration and cost-savings plans among others as well as its guidance for 2019 at the Investor Day presentation to be held on May 9, 2019.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.16% due to these changes.

VGM Scores

At this time, Perrigo has a subpar Growth Score of D, though it is lagging a bit 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 C. 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. Notably, Perrigo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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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 Nasdaq, Inc.

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