Elanco Animal's Outlook Lags Street Expectations But Analyst Sees Time For Elanco's Commercial Investment To Payoff

On Tuesday, Elanco Animal Health Incorporated  ELAN reported fourth-quarter revenue of $1.02 billion, a decrease of 1% on a reported basis or a 4% organic constant currency growth, beating the consensus of $1.01 billion.

The animal health company reported adjusted EPS of 14 cents, up from 8 cents year over year, but it missed the consensus of 15 cents.

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Pet Health revenue was $439 million, up 6% year-over-year, with a 3% increase from price in the quarter, primarily driven by contributions from the continued strength of global over-the-counter retail parasiticide business and new products, including Zenrelia and Credelio Plus, which were partially offset by competitive pressures in the U.S. veterinary channel.

Farm Animal revenue was $570 million, a 7% decrease on a reported basis and a 2% increase on an organic constant currency basis.

In addition to a 3% contribution from price in the fourth quarter, the year-over-year organic constant currency growth was also driven by the continued strong demand for Experior and Rumensin in the U.S. and strong demand for swine across multiple geographies.

Adjusted EBITDA was $177 million, an increase of 7%. Adjusted EBITDA margin was 17.4%, an increase of 150 basis points.

Guidance: Elanco expects 2025 revenues of $4.45 billion—$4.51 billion versus the consensus of $4.53 billion and adjusted EPS of 80-86 cents versus the consensus of 90 cents.

The company anticipates a headwind to revenue of approximately $110 million from the unfavorable impact of foreign exchange rates.

“We are focused on accelerating organic constant currency revenue growth for 2025, with continued efforts to improve our earnings potential and leverage profile. As we navigate a dynamic macroeconomic backdrop, we remain confident in the underlying drivers of the 2025 outlook provided during the November earnings call. The only adjustment we have made is for incremental currency headwinds using rates from earlier this month,” said Todd Young, Executive Vice President and CFO of Elanco.

For the first quarter of 2025, the company expects revenues of $1.16 billion—$1.18 billion versus a consensus of $1.21 billion and adjusted EPS of 29-34 cents versus a consensus of 30 cents.

William Blair analyst Brandon Vazquez writes, “We acknowledge Elanco is creating a pathway to an improved P&L statement, but we continue to think it might take multiple quarters to start to see a return on commercial investments, which might limit share upside for now.”

The analyst maintains the Market Perform rating.

Price Action: ELAN stock is down 4.68% at $10.59 at the last check on Tuesday.

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