Why Is Phibro (PAHC) Down 5.2% Since Last Earnings Report?

Zacks
08 Mar

It has been about a month since the last earnings report for Phibro Animal Health (PAHC). Shares have lost about 5.2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Phibro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

PAHC Q2 Earnings & Revenues Beat, Margins Increase

Phibro Animal Health delivered adjusted earnings per share (EPS) of 54 cents in the second quarter of fiscal 2025 compared with 33 cents in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 28.5%.

Without adjustments, the GAAP EPS in the quarter was 8 cents compared with 3 cents in the prior-year period.

PAHC’s Q2 Sales

Net sales in the quarter totaled $309.3 million, up 23.8% from the year-ago quarter’s level. The figure also exceeded the Zacks Consensus Estimate by 3.6%.

Phibro’s Segmental Sales

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

In the second quarter of fiscal 2025, Animal Health’s net sales increased 32.5% to $229.4 million. The figure surpassed our model’s projection of $195.6 million.

Within the segment, net sales of medicated feed additives (MFAs) and others reflected 47% year-over-year growth. This was driven by incremental revenues of $36.7 million from sales of products from the Zoetis MFA portfolio acquired on Oct. 31, 2024. Increased demand for the company’s MFA products in international regions and processing aids used in the ethanol fermentation industry also contributed.

Nutritional Specialty product sales rose 11% due to increased domestic dairy demand and higher sales of microbial and companion animal products.

Net vaccine sales showed a year-over-year rise of 12%, primarily due to the continued growth of poultry products in Latin America, along with an increase in international demand.

Net sales in the Mineral Nutrition segment rose 5% year over year to $59.1 million due to an increase in demand for trace minerals. Our model forecast was $58.7 million.

Net sales in the Performance Products segment rose 7% to $16.6 million due to higher demand for the ingredients used in personal care products. This also surpassed our model’s projection of $15.6 million.

PAHC’s Margin Performance

Phibro’s fiscal second-quarter gross profit rose 29.6% year over year to $101.9 million. The gross margin expanded 149 basis points (bps) to 32.9% despite a 21% rise in the cost of goods sold.

Selling, general and administrative expenses in the reported quarter were $76.3 million, up 21.3% from the year-ago quarter’s levels. The operating profit totaled $25.6 million, an increase of 63.1% year over year. The operating margin expanded 199 bps year over year to 8.3%.

PAHC’s Financial Update

The company exited the second quarter of fiscal 2025 with cash and short-term investments of $67.1 million compared with $89.8 million at the end of the first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $15.7 million compared with $47.8 million in the year-ago period.

Phibro’s Updated Fiscal 2025 Guidance

Phibro’s updated guidance includes the acquisition of the Zoetis Medicated Feed Additive portfolio.

For fiscal 2025, the company now expects net sales in the range of $1.25-$1.30 billion (earlier $1.05-$1.10 billion), implying 25% growth (previously 6%). The Zacks Consensus Estimate for the metric is pegged at $1.18 billion.

Adjusted EPS is expected in the range of $1.87-$2.01 (earlier $1.34-$1.48). The revised outlook indicates a 63% improvement compared to the earlier projected 18%. The Zacks Consensus Estimate is pegged at $1.62.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 29.38% due to these changes.

VGM Scores

Currently, Phibro has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Phibro has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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