Phibro Q4 Earnings and Revenues Beat, Operating Margin Down

Phibro Animal Health PAHC delivered adjusted earnings per share of 41 cents in the fourth quarter of fiscal 2024, up 7.9% from the year-ago quarter's level. The bottom line beat the Zacks Consensus Estimate by 20.6%.

Without adjustments, the GAAP EPS in the quarter was 2 cents, down 92.9% from the year-ago quarter's figure.

PAHC reported full-year adjusted EPS of $1.19, reflecting a 1.7% decline from fiscal 2023. The figure beat the Zacks Consensus Estimate by 6.25%.

PAHC's Net Sales

In the quarter under review, net sales totaled $273.2 million, up 7.1% from the year-ago quarter's level. The figure also topped the Zacks Consensus Estimate by 4.1%.

For fiscal 2024, the company reported net sales of $1.02 billion, up 4.1% from the prior-year level. The figure beat the Zacks Consensus Estimate by a marginal 1%.

Phibro's Segmental Sales

The company conducts its operations via three segments — Animal Health, Mineral Nutrition and Performance Products.

In the fourth quarter of fiscal 2024, Animal Health's net sales increased 8% to $191.5 million. Within the segment, net sales of medicated feed additives (MFAs) and others reflected 12% year-over-year growth. The uptick was driven by the increased demand for MFAs in both domestic and international regions and higher demand for processing aids used in the ethanol fermentation industry. The top line surpassed our model's projection of $181.8 million by 5.3%.

Nutritional specialty product sales decreased 4%, primarily due to lower demand for dairy products. However, net vaccine sales showed a year-over-year rise of 14%, mostly due to poultry product introductions in Latin America, along with an increase in domestic and international demand.

Net sales in the Mineral Nutrition segment rose 6% year over year to $62.1 million due to increased sales volume and higher average selling price. The top line surpassed our model's projection of $61.9 million by a marginal 0.3%.

Net sales in the Performance Products segment fell 1% to $19.6 million as a result of the decreased demand for personal care product ingredients and industrial chemicals. The top line surpassed our model's projection of $18 million by 8.9%.

Phibro Animal Health Corporation Price, Consensus and EPS Surprise

PAHC's Margin Performance

Phibro's fiscal fourth-quarter gross profit rose 13.8% year over year to $87.2 million. The gross margin expanded 188 basis points (bps) to 31.9% despite a 4.3% rise in the cost of goods sold.

SG&A expenses in the reported quarter were $68.7 million, up 29.9% from the year-ago quarter's levels. The operating profit declined 21% year over year to $18.5 million and the operating margin contracted 252 bps to 6.8% in the quarter under review.

PAHC's Financial Update

The company exited the fourth quarter of fiscal 2024 with cash and short-term investments of $114.6 million compared with $98.7 million at the end of the fiscal third quarter.

Cumulative net cash provided by operating activities at the end of fiscal 2024 was $87.6 million compared with $13.3 million in the year-ago period.

Phibro's Fiscal 2025 Guidance

The company expects net sales to be between $1.04 billion and $1.09 billion. The Zacks Consensus Estimate for the metric is pegged at $1.25 billion.

Adjusted EPS is expected to be in the range of $1.22-$1.37. The Zacks Consensus Estimate for the same is pegged at $1.43.

Our Take on Phibro's Q4 Results

Phibro delivered better-than-expected revenues and earnings in the reported quarter. The core Animal Health segment benefited from the robust performance of the vaccine, MFAs and other businesses. Additionally, the Mineral Nutrition Products segment reported year-over-year growth.

The anticipated closing of the Zoetis Medicated Feed Additive portfolio acquisition in the coming months may lead to strong earnings accretion. It can also drive investments in the faster-growing vaccines, nutritional specialties and companion animal product segments.

Meanwhile, the contraction of the operating margin in the quarter is discouraging. Declining revenues from the Performance Products segment raise concern.

PAHC's Zacks Rank & Other Key Picks

Phibro currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Intuitive Surgical ISRG, TransMedics Group and Quest Diagnostics DGX.

Intuitive Surgical reported a second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy).

Intuitive Surgical has a long-term five-year earnings growth rate of 17.4% compared with the industry's 13.7%. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.

TransMedics, carrying a Zacks Rank #1 at present, reported second-quarter 2024 earnings of 35 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. Revenues of $114.3 million topped the Zacks Consensus Estimate by 15.9%.

TMDX has an earnings growth rate of 51.7% for 2025 compared with the S&P 500's 11.3%. The company beat on earnings in each of the trailing four quarters, the average surprise being 287.50%.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy) at present, reported a second-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion outpaced the Zacks Consensus Estimate by 0.5%.

DGX has a historical five-year earnings growth rate of 7.4% compared with the industry's 4.2%. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.31%.

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