Perrigo Company’s PRGO second-quarter 2015 earnings of $2.18 per share beat the Zacks Consensus Estimate of $1.97. Reported quarter earnings were 25% above the year-ago figure.
Net sales in the quarter rose 34% to $1.5 billion benefiting from higher sales in Branded Consumer Healthcare and Rx Pharmaceuticals segments. The increase in revenues was partially offset by unfavorable foreign currency movements and lower sales volume in the VMS and animal health categories. Revenues were in line with the Zacks Consensus Estimate.
Second Quarter in Detail
Perrigo reports revenues primarily from the following segments: Consumer Healthcare, Branded Consumer Healthcare (newly acquired Omega business), Rx Pharmaceuticals, Specialty Sciences and Other (which includes the active pharmaceutical ingredients (API) business).
Consumer Healthcare: Perrigo reported Consumer Healthcare revenues of $746.4 million in the quarter, down 3% year over year. Revenues were hampered by discontinued products, decline in existing products primarily in the animal health, antacids and VMS categories and the negative impact of foreign currency translation.
Branded Consumer Healthcare: Perrigo reported revenues of $401.2 million, which reflects revenues from the newly acquired Omega business.
Rx Pharmaceuticals: The Rx Pharmaceuticals segment performed encouragingly during the quarter with net sales rising 10% to $278.3 million, driven by new product sales.
Specialty Sciences: Segmental revenues comprising royalties received by Perrigo on multiple sclerosis drug Tysabri from Biogen Inc. BIIB came in at $83.6 million, down 3% year over year. Unfavorable foreign currency movements reduced revenues by $7 million.
Others accounted for the remaining revenues.
Outlook Maintained
The company continues to expect 2015 earnings in the range of $7.50 to $8.00 per share, representing an increase of 20% to 28%. The Zacks Consensus Estimate of $8.73 is much above the guidance range.
Our Take
We are impressed by Perrigo beating on second-quarter earnings. We are pleased with the performance of the Branded Consumer Healthcare and Rx Pharmaceuticals segments. However, disappointing performance from Consumer Healthcare is concerning.
We are positive on the company’s ‘Base Plus Plus Plus' strategy focused on the expansion of the company’s base by pursuing acquisitions. Since its Omega Pharma acquisition earlier this year, the company has entered into several acquisition deals (including Naturwohl Pharma GmbH along with its leading German dietary supplement brand, Yokebe).
Meanwhile, Mylan MYL is looking to acquire Perrigo and has received the European regulatory approval to move forward with its proposed buyout. Investor focus is expected to remain on Mylan-Perrigo updates in the near term.
Perrigo carries a Zack Rank #2 (Buy). Ligand Pharmaceuticals Incorporated LGND is another well-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).
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