Phibro (PAHC) Q2 Earnings Top Estimates, Revenues Fall Y/Y

Phibro Animal Health Corporation PAHC reported adjusted earnings per share (EPS) of 34 cents in the second quarter of fiscal 2020, reflecting a 17.1% fall from the year-ago 41 cents. The figure, however, beat the Zacks Consensus Estimate by 21.4%.

Meanwhile, without adjustments, reported EPS was 29 cents, down 19.4% from the year-ago count.

Net Sales

In the quarter under review, net sales totaled $214 million, down 1.9% year over year owing to substantially lower sales at two core segments — Mineral Nutrition and Performance Products.

Segmental Sales Break-Up

During the second quarter, Animal Health net sales grew 3% to $143.7 million. Within this segment, the company registered $92 million in sales of medicated feed additives (MFAs) and other, reflecting a 1% year-over-year decline. This was on account of lower demand owing to African swine fever outbreak in China.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise


Phibro Animal Health Corporation Price, Consensus and EPS Surprise

Phibro Animal Health Corporation price-consensus-eps-surprise-chart | Phibro Animal Health Corporation Quote


Within Animal Health, Nutritional specialty product sales rose 12% to $33.1 million on volume growth in domestic poultry and dairy products. The recently-completed acquisition of Osprey Biotechnics also aided sales at the segment.

Apart from this, net vaccine sales totaled $18.7 million, showing an increase of 10% year over year, driven by robust international demand and enhanced market penetration.

Net sales at the Mineral Nutrition segment fell 11% year over year to $55.7 million owing to lower average selling prices combined with lower overall unit volume.

Net sales at the Performance Products segment fell 10% to $14.6 million owing to lower volume of copper-based products.


Phibro’s second-quarter gross profit rose 1% year over year to $69.1 million. Also, gross margin expanded 85 basis points (bps) to 32.3%.

Selling, general and administrative expenses in the reported quarter were $49.5 million, up 15.4% from the year-ago quarter.

Operating profit declined 23.7% year over year to $20 million and operating margin contracted 262 bps to 9.2% in the quarter under review.

Financial Update

The company ended the second quarter of fiscal 2020 with cash and short-term investments on hand of $75 million compared with $79 million at the end of first-quarter fiscal 2020.

Cumulative net cash provided by operating activities at the end of the second quarter was $28.5 million compared with the year-ago figure of $16.6 million. Cumulative capital expenditure amounted to $16.1 million at the end of the second quarter, reflecting an increase from the year-ago $12.1 million.

FY20 Outlook

The company has lowered its guidance for fiscal 2020. The company has lowered the revenue outlook to $812-828 million from the earlier-issued $833-863 million. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $833.6 million.

Adjusted EPS is pegged at 88-95 cents, lower than the earlier-provided range of $1.08-$1.15. The Zacks Consensus Estimate for adjusted EPS is pegged at $1.11.

Our Take

Phibro exited second-quarter fiscal 2020 on a mixed note as earnings beat the consensus mark and revenues declined year over year. Revenue decline in two of its core segments and contraction in operating margin are concerning. The lowered fiscal 2020 guidance is another cause of worry. However, the company witnessed revenue growth in its Animal Health segment. Strong international volume growth in domestic dairy products and the Osprey Biotechnics acquisition drove Nutritional specialty product sales.

Earnings of Other MedTech Majors at a Glance

Phibro currently has a Zacks Rank of 3 (Hold).

Some better-ranked stocks, which reported solid results this earnings season, are Stryker Corporation SYK, Accuray Incorporated ARAY and AmerisourceBergen ABC. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Revenues of $4.13 billion surpassed the consensus estimate by 0.7%. The company carries a Zacks Rank #2 (Buy).

Accuray reported second-quarter fiscal 2020 adjusted EPS of a penny, comparing favorably with the Zacks Consensus Estimate of a loss of 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1.

AmerisourceBergen reported first-quarter fiscal 2020 adjusted EPS of $1.76, which beat the Zacks Consensus Estimate of $1.67 by 5.4%. The Zacks Rank of 2 company has an expected long-term earnings growth rate of 7.4%.

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