Prestige Consumer Q4 Earnings Miss, Operating Margin Falls

Prestige Consumer Healthcare Inc. PBH delivered fourth-quarter fiscal 2024 earnings per share of $1.02, a 4.7% decline from the year-ago period's figure. The metric also missed the Zacks Consensus Estimate by 10.5%.

GAAP EPS for the quarter was 98 cents, a significant improvement from the year-ago loss of $4.78 per share.

For the full year, adjusted EPS was $4.21, flat year over year.

Revenues

Total revenues in the fiscal fourth quarter declined 3.1% year over year (down 2.9% on an organic basis) to $276.9 million and lagged the Zacks Consensus Estimate by 3.5%.

The disappointing revenue performance for the quarter was caused by supply chain pressure late in the fourth quarter that affected Prestige Consumer's ability to fulfill retailer orders.

Full-year revenues were $1.13 billion, unchanged from the fiscal 2023 level.

Segments in Detail

The company conducts its operations through two reportable segments — North American OTC Healthcare and International OTC Healthcare.

Revenues in the North American OTC Healthcare segment totaled $231.1 million, down 4.6% from the year-earlier quarter. Our model projected the segment's revenues to be $242.6 million in the fourth quarter.

The revenue performance for the quarter was due to the inability to supply customer orders late in the quarter in certain brands as well as a lower Women's Health category and the strategic exit of private label business.

Revenues in the International OTC Healthcare segment were $45.9 million, up 5.3% from the year-ago quarter's figure. The company reported strong performance across numerous brands and geographies. However, this was marred by poor supply chain constraints.

Our model projected revenues from this segment to be $44.4 million.

Margins

The gross profit in the fiscal fourth quarter declined 1.1% year over year to $153.9 million.  Meanwhile, the gross margin expanded 115 basis points (bps) year over year to 55.6% on a 5.6% increase in the cost of sales (excluding depreciation).

During the quarter, advertising and marketing expenses rose 21.5% to $37.5 million, while general and administrative expenses decreased 4.3% to $26.5 million. Adjusted operating income in the quarter under review was $89.9 million, highlighting a decrease of 7.3%. The adjusted operating margin contracted 147 bps to 32.5%.

Financial Update

Prestige Consumer exited the fiscal fourth quarter with cash and cash equivalents of $46.5 million compared with the $63.6 million recorded at the end of the fiscal third quarter. Long-term debt totaled $1.13 billion, down from $1.20 billion at the end of fiscal third quarter.

The cumulative net cash provided by operating activities at fourth-quarter end was $248.9 million compared with $229.7 million in the year-ago period. The cumulative adjusted free cash flow at the end of the fiscal fourth quarter was $239.4 million compared with $221.9 million in the year-ago period.

Guidance

The company provided its initial fiscal 2025 organic revenue growth and EPS outlook.

Revenues for the full year are anticipated in the range of $1.125 billion-$1.140 billion. Organic revenue growth for the full year is anticipated to be approximately 1%. The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $1.16 billion.

Prestige Consumer expects fiscal 2025 EPS to be in the range of $4.40-$4.46. The Zacks Consensus Estimate for fiscal 2025 EPS stands at $4.61.

Free cash flow for the full year is likely to be $240 million or more.

Our Take

PBH exited the fiscal fourth quarter of 2024 with lower-than-expected revenues and earnings.  The company noted that strong consumption trends and organic international segment growth were more than offset by supply chain pressure as well as continued Women's Health category weakness and the strategic exit of the private label business.Within the North American OTC segment, headwinds related to the strategic exit of the private-label business and weakness in certain non-core brands marred the strength of the Eye and Ear Care category.

The contraction of the adjusted operating margin during the quarter is discouraging.

Zacks Rank and Key Picks

Prestige Consumer currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks from the broader medical space are Medpace MEDP, ResMed RMD and Encompass Health Corporation EHC.

Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year's comparable figure.

Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry's 12.3%. The company's earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.

ResMed, carrying a Zacks Rank #2 (Buy), reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.

RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry's 15.7%. The company delivered a four-quarter average earnings surprise of 2.8%.

Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.

EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry's 11.7% growth. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.

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