Perrigo Company plc’s (PRGO) second-quarter fiscal 2014 (ended Dec 28, 2013) earnings of $1.87 per share easily beat the Zacks Consensus Estimate of $1.60. The company reported earnings of $1.36 per share in the prior-year quarter. The year-over-year rise in earnings was due to higher revenues.
Net sales in the quarter climbed 11% to $979 million. Revenues increased $39 million due to the inclusion of results of Rosemont Pharma (acquired by Perrigo in Feb 2013), Velcera (acquired in Apr 2013), Fera’s ophthalmic product portfolio (acquired in Jun 2013) and Elan Corporation (acquired in Dec 2013). Newly launched products boosted revenues by $53 million. Revenues fell short of the Zacks Consensus Estimate of $996 million.
The Second Quarter in Detail
Perrigo reports revenue primarily from the following segments: Consumer HealthCare (CHC), Nutritionals, Rx Pharmaceuticals, Active Pharmaceutical Ingredients (API) and Specialty Sciences. The Specialty Sciences unit came into existence following the completion of the acquisition of Elan Corporation on Dec 18, 2013.
Consumer Healthcare: Perrigo reported CHC revenue of $536 million in the quarter, down 1% from the prior year. Segmental revenues were hurt by lower sales of existing offerings primarily in the contract manufacturing and analgesics units. . Adjusted gross margin for the segment climbed to 32.7% from 32.1% a year ago aided primarily by new product sales.
Nutritional: Perrigo reported revenue of $140 million, up 15% year over year. All the sub-groups of the segment witnessed growth during the reported quarter. Adjusted gross margin for the segment climbed to 29.9% in the second quarter of fiscal 2014 from 27.2% a year ago. Improved operating efficiencies and expense leverage on higher sales contributed to the margin expansion.
Rx Pharmaceuticals: The Rx Pharmaceuticals segment performed encouragingly during the quarter with net sales improving 52% to $247 million. Sales of new products boosted segmental revenues by $24 million. Inclusion of results of Rosemont Pharma and Fera’s ophthalmic product portfolio boosted sales by $26 million. Adjusted gross margin for the segment expanded to 60.9% from 58.1% a year ago. The increase was due to favorable product mix and acquisitions.
Active Pharmaceutical Ingredients: The company reported API sales of $30 million, down 27% from the prior-year quarter. Results were hurt by lower sales of existing products due to increased competition.
Specialty Sciences: Segmental revenues came in at $7 million as royalties received by Perrigo on multiple sclerosis drug Tysabri from Biogen Idec (BIIB). We note that this is the first earnings report for the Dublin, Ireland-based Perrigo Company plc, formed following the Dec 2013 merger of Allegan, MI-based Perrigo Company and Elan Corporation.
Others accounted for the remaining revenues.
Fiscal 2014 View Upped
Perrigo increased its earnings per share (on an adjusted basis) guidance for fiscal 2014. The company now expects earnings in the range of $6.45–$6.70 (previous guidance: $6.35–$6.60), up 15%–19% over fiscal 2013 levels. The (pre-earnings) Zacks Consensus Estimate of $6.62 is within the guidance range. The earnings beat and improved guidance helped the stock gain in the pre-market trading.
Perrigo currently carries a Zacks Rank #3 (Hold). Investors interested in the medical industry can also consider stocks like NuVasive, Inc. (NUVA) carrying a Zacks Rank #1 (Strong Buy) and Covidien (COV) with a Zacks Rank #2 (Buy).
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