Phibro Animal Health Corporation
PAHC
has been gaining from robust growth in the Animal Health segment during first-quarter fiscal 2022. The upside in this arm was led by strength in the nutritional specialties and vaccine product lines. The company’s diversified offerings across key animal health products buoy optimism. However, macroeconomic challenges and stiff competition raise apprehension.
Over the past year, the Zacks Rank #3 (Hold) stock has lost 1.8% against the 5.5% fall of the
industry
and 28.8% rise of the S&P 500.
The renowned medical device company has a market capitalization of $827.89 million. The company‘s earnings surpassed estimates in two of the trailing four quarters, met estimates in one and missed in one, delivering an average surprise of 4.6%.
The company’s expected earnings growth for the next year is estimated at 4.7%, compared with the industry’s growth expectation of 20.1% and the S&P 500’s estimated 4.1% growth for the next year.
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Let’s delve deeper.
Factors At Play
Diversified Product Portfolio:
Phibro’s key animal health products, including Medicated Feed Additives (MFAs) and nutritional specialty products, facilitate 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. Similarly, its nutritional product offerings, such as OmniGen-AF, are used increasingly in the global dairy industry. The company also manufactures vaccines that protect animals from viral and bacterial disease challenges. Meanwhile, Phibro’s mineral nutrition products strengthen an animal’s diet and help maintain optimal health.
Prospering Vaccine Business:
Phibro is focusing its efforts on new developments as well as incremental registrations and increasing volumes of existing nutritional specialties and vaccine technologies. The company has expanded its aquaculture product line by acquiring the assets of KoVax, an Israel-based vaccine developer and manufacturer. In the first quarter of fiscal 2022, Phibro registered a 25% improvement in vaccine net sales driven primarily by growth in North America and the Asia Pacific. We are currently upbeat about the company’s plans to launch the novel Lyme vaccine delivery system by 2022.
Impressive Q1 Results:
Phibro’s fiscal first-quarter revenues rose year over year, backed by strong international demand for poultry and cattle products and stronger growth in the nutritional specialties and vaccine product lines. Growth in the Animal Health segment was driven by 6%, 10% and 25% growth in the MFAs, nutritional specialties and vaccine product lines, respectively. The company has raised its revenue forecast for fiscal 2022 on improving business trends.
Downsides
Macroeconomic Woes:
During the fiscal first quarter, Phibro’s business was hurt by continued supply chain and staffing problems. While the company raised prices on selective products and realized increased volumes, these increases did not fully compensate for the higher cost of freight, labor materials and unfavorable currency movement.
Foreign Exchange Headwinds:
Phibro is subject to currency risk to the extent that its costs are denominated in currencies other than those in which the company earns revenues. In this regard, the company manufactures some of its major products in Brazil and Israel, where production costs are largely denominated in local currencies while selling prices are largely set in U.S. dollars.
Competitive Landscape:
Phibro is susceptible to threat from a substantial number of global and regional competitors concerning its major products. Moreover, increasing consolidation in the animal health market could potentially benefit Phibro’s competitors.
Estimate Trend
Over the past 60 days, the Zacks Consensus Estimate for Phibro’s fiscal 2022 earnings has moved 0.8% north to $1.28.
The Zacks Consensus Estimate for its fiscal 2022 revenues is pegged at $875.05 million, suggesting a 5.01% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are
Apollo Endosurgery, Inc.
APEN
,
AMN Healthcare Services, Inc.
AMN
and
Thermo Fisher Scientific Inc.
TMO
, each carrying a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apollo Endosurgery has a long-term earnings growth rate of 7%. The company‘s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 25.6%, on average.
Apollo Endosurgery has outperformed its industry in the past year. APEN has gained 135.3% compared with the industry’s 8.6% growth.
AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 68.6% versus the 49.7% industry decline.
Thermo Fisher has a long-term earnings growth rate of 14%. The company’s earnings surpassed estimates in the trailing four quarters, delivering an average surprise of 9%.
Thermo Fisher has outperformed its industry in the past year. TMO has rallied 27.4% compared with the industry’s 8.7% rise.
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