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Is Phibro (PAHC) Stock Worth Retaining in Your Portfolio Now?
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Phibro Animal Health Corporation’s (PAHC - Free Report) robust sales of vaccines and MFAs (Medicated Feed Additives) promise sustained growth in the Animal Health business in the upcoming quarters. The company’s focus on advancing nutritional specialties and vaccine technologies, along with the new vaccine production unit, instills optimism. Sound financial stability also bodes well.
Yet, adverse macroeconomic impacts are a concern for Phibro’s operations. Additionally, the company faces growing competition from generic alternatives, which could restrict its growth.
In the past year, this Zacks Rank #2 (Buy) stock has rallied 18.5% compared with the 4.7% rise of the industry and 18.6% growth of the S&P 500 composite.
The renowned animal health and mineral nutrition company has a market capitalization of $718.5 million. PAHC has an earnings yield of 8.06% compared to the industry’s yield of 0.93%. In the last reported quarter, Phibro delivered an earnings surprise of 6.9%.
Let’s delve deeper.
Factors at Play
Animal Health Business Expansion Continues: Phibro’s key animal health products, including MFAs (Medicated Feed Additives) and nutritional specialty products, aid in enhancing animal nutrition. The company’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine.
During the third quarter of fiscal 2024, Animal Health saw a robust 26% increase in vaccine net sales driven by product launches in Latin America, plus an increase in domestic demand. The company registered a 16% jump in MFAs and others, driven by the increased demand in both domestic and international regions.
In the United States, Phibro delivered strong sales from a new line of nutritional specialty products for poultry. Moreover, the company is committed to developing its companion animal business and pipeline. These are key growth areas for Phibro both in the short and medium term, and it has been actively investing in these growth drivers to achieve its targets. Further, sales of Mineral Nutrition and Performance Products are also likely to significantly improve as inventory rebalances and demand rebounds.
Image Source: Zacks Investment Research
Vaccine Business Prospers: Phibro is focusing on new developments, along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. The company also makes significant investments to expand vaccine manufacturing capacity at several locations.
The vaccine product line witnessed a robust 26% improvement in the third quarter of fiscal 2024, driven by a strong uptake across various regions, especially in Latin America, and also benefitted from growing domestic demand. The company launched new commercial vaccines and looks forward to bringing additional vaccines to the Americas. During fiscal 2024, Phibro completed its vaccine production facility in Guarulhos, Brazil, which should propel sales growth.
Stable Solvency Structure With Heavy Payout Load: At the end of the third quarter of fiscal 2024, Phibro’s total cash and short-term investments were $99 million compared with $92 million at the end of the second quarter of fiscal 2024. The company has good solvency reflected through its low near-term-payable debt level of $30 million at the end of the reported quarter.
Meanwhile, the total debt came up to $486 million compared with $475 million at the end of the second quarter of 2024. With a debt-to-capital ratio of 64.3%, the company has a highly leveraged balance sheet.
Downsides
Macroeconomic Concerns: In the current scenario, Phibro’s business is severely impacted by economic sanctions, bans and broader military conflicts resulting from the ongoing armed conflict between Russia and Ukraine. The company’s gross margin decreased in the third quarter of fiscal 2024 due to higher costs. In a challenging macro environment, the Mineral Nutrition business has been facing adverse movements in commodity prices and inventory positions.
While margins may return to some historical levels as the fiscal year progresses, Phibro anticipates that volume recovery might be longer. Meanwhile, sales of Performance Products also decreased by 1.7% year over year due to the reduced demand for personal care product ingredients and industrial chemicals.
Generic Pressure to Affect Growth: Phibro also faces competition from generic alternatives of some of its products. The company depends primarily on trade secrets to provide management with competitive advantages for many of its products. The protection afforded is limited by the availability of new competitive products or generic versions of existing products that can successfully compete with Phibro’s products. As a result, Phibro faces competition from such new competitive products or lower-priced generic alternatives.
These days, generic competitors are becoming more aggressive in terms of pricing, and generic products form a considerable proportion of overall animal health sales in certain regions. If animal health customers increase their use of new or existing generic products, it will adversely affect Phibro’s financial health and operational performance.
Estimate Trend
The Zacks Consensus Estimate for Phibro’s fiscal 2024 earnings per share (EPS) has moved 0.9% south to $1.12 in the past 30 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $1.01 billion. This suggests a 2.9% rise from the year-ago reported number.
Haemonetics has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.1%. HAE’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.2%. Its shares have risen 1.4% compared with the industry’s 4.7% growth in the past year.
Avanos Medical, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 34.9% compared with the industry’s 11.5%. Shares of the company have fallen 1.5% against the industry’s 3.9% rise over the past year.
AVNS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 5.7%. In the last reported quarter, it delivered an average earnings surprise of 17.2%.
Teleflex, carrying a Zacks Rank #2 at present, has an earnings yield of 5.8% against the industry’s -6.2%. Shares of TFX have decreased 1.3% against the industry’s 3.8% rise over the past year.
TFX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.6%. In the last reported quarter, it delivered an average earnings surprise of 2.7%.
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Is Phibro (PAHC) Stock Worth Retaining in Your Portfolio Now?
Phibro Animal Health Corporation’s (PAHC - Free Report) robust sales of vaccines and MFAs (Medicated Feed Additives) promise sustained growth in the Animal Health business in the upcoming quarters. The company’s focus on advancing nutritional specialties and vaccine technologies, along with the new vaccine production unit, instills optimism. Sound financial stability also bodes well.
Yet, adverse macroeconomic impacts are a concern for Phibro’s operations. Additionally, the company faces growing competition from generic alternatives, which could restrict its growth.
In the past year, this Zacks Rank #2 (Buy) stock has rallied 18.5% compared with the 4.7% rise of the industry and 18.6% growth of the S&P 500 composite.
The renowned animal health and mineral nutrition company has a market capitalization of $718.5 million. PAHC has an earnings yield of 8.06% compared to the industry’s yield of 0.93%. In the last reported quarter, Phibro delivered an earnings surprise of 6.9%.
Let’s delve deeper.
Factors at Play
Animal Health Business Expansion Continues: Phibro’s key animal health products, including MFAs (Medicated Feed Additives) and nutritional specialty products, aid in enhancing animal nutrition. The company’s leading product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry and swine.
During the third quarter of fiscal 2024, Animal Health saw a robust 26% increase in vaccine net sales driven by product launches in Latin America, plus an increase in domestic demand. The company registered a 16% jump in MFAs and others, driven by the increased demand in both domestic and international regions.
In the United States, Phibro delivered strong sales from a new line of nutritional specialty products for poultry. Moreover, the company is committed to developing its companion animal business and pipeline. These are key growth areas for Phibro both in the short and medium term, and it has been actively investing in these growth drivers to achieve its targets. Further, sales of Mineral Nutrition and Performance Products are also likely to significantly improve as inventory rebalances and demand rebounds.
Image Source: Zacks Investment Research
Vaccine Business Prospers: Phibro is focusing on new developments, along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. The company also makes significant investments to expand vaccine manufacturing capacity at several locations.
The vaccine product line witnessed a robust 26% improvement in the third quarter of fiscal 2024, driven by a strong uptake across various regions, especially in Latin America, and also benefitted from growing domestic demand. The company launched new commercial vaccines and looks forward to bringing additional vaccines to the Americas. During fiscal 2024, Phibro completed its vaccine production facility in Guarulhos, Brazil, which should propel sales growth.
Stable Solvency Structure With Heavy Payout Load: At the end of the third quarter of fiscal 2024, Phibro’s total cash and short-term investments were $99 million compared with $92 million at the end of the second quarter of fiscal 2024. The company has good solvency reflected through its low near-term-payable debt level of $30 million at the end of the reported quarter.
Meanwhile, the total debt came up to $486 million compared with $475 million at the end of the second quarter of 2024. With a debt-to-capital ratio of 64.3%, the company has a highly leveraged balance sheet.
Downsides
Macroeconomic Concerns: In the current scenario, Phibro’s business is severely impacted by economic sanctions, bans and broader military conflicts resulting from the ongoing armed conflict between Russia and Ukraine. The company’s gross margin decreased in the third quarter of fiscal 2024 due to higher costs. In a challenging macro environment, the Mineral Nutrition business has been facing adverse movements in commodity prices and inventory positions.
While margins may return to some historical levels as the fiscal year progresses, Phibro anticipates that volume recovery might be longer. Meanwhile, sales of Performance Products also decreased by 1.7% year over year due to the reduced demand for personal care product ingredients and industrial chemicals.
Generic Pressure to Affect Growth: Phibro also faces competition from generic alternatives of some of its products. The company depends primarily on trade secrets to provide management with competitive advantages for many of its products. The protection afforded is limited by the availability of new competitive products or generic versions of existing products that can successfully compete with Phibro’s products. As a result, Phibro faces competition from such new competitive products or lower-priced generic alternatives.
These days, generic competitors are becoming more aggressive in terms of pricing, and generic products form a considerable proportion of overall animal health sales in certain regions. If animal health customers increase their use of new or existing generic products, it will adversely affect Phibro’s financial health and operational performance.
Estimate Trend
The Zacks Consensus Estimate for Phibro’s fiscal 2024 earnings per share (EPS) has moved 0.9% south to $1.12 in the past 30 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $1.01 billion. This suggests a 2.9% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Haemonetics (HAE - Free Report) , Avanos Medical (AVNS - Free Report) and Teleflex (TFX - Free Report) .
Haemonetics has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.1%. HAE’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.2%. Its shares have risen 1.4% compared with the industry’s 4.7% growth in the past year.
HAE carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Avanos Medical, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 34.9% compared with the industry’s 11.5%. Shares of the company have fallen 1.5% against the industry’s 3.9% rise over the past year.
AVNS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 5.7%. In the last reported quarter, it delivered an average earnings surprise of 17.2%.
Teleflex, carrying a Zacks Rank #2 at present, has an earnings yield of 5.8% against the industry’s -6.2%. Shares of TFX have decreased 1.3% against the industry’s 3.8% rise over the past year.
TFX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.6%. In the last reported quarter, it delivered an average earnings surprise of 2.7%.