Perrigo's (PRGO) Q1 Earnings Beat Estimates, Guidance Intact

Perrigo Company plc (NYSE:PRGO) reported first-quarter 2017 earnings of $1.05 per share which beat the Zacks Consensus Estimate of 98 cents per share by 7.1%. However, adjusted earnings declined 20.5% from the year-ago figure.

The company also reported earnings of 50 cents per share of the same period, including amortization and restructuring charges and other one-time items. The figure is down 114% year over year.

Shares of Perrigo have significantly underperformed the Zacks classified Medical Products industry so far this year. The stock has lost 18.3% compared to the broader industry’s gain of 16%.



Net sales in the reported quarter dropped to $1.19 billion by 11.4%, primarily due to lower contribution from sales of existing products. In addition, divestures of some businesses and currency headwinds hurt the top-line. But revenues surpassed the Zacks Consensus Estimate of $1.18 billion.

Segment Discussion

In Jan 2017, Perrigo announced to having changed its reporting segments following the sale of the Tysabri royalty stream earlier in March this year. Effective from Jan 1, 2017, the company’s new reporting segments are: Consumer Health Care Americas (CHCA), Consumer Health Care International (CHCI), Prescription Pharmaceuticals (RX) and Other Segment.

CHCA: CHCA net sales in the first quarter of 2017 came in at $583 million, down 9% due to sale of the vitamins, minerals and supplements (VMS) business, which had contributed to segmental sales in the prior year.

Though the company reported higher cough and cold product sales in the quarter, these were offset by lower sales of existing products primarily in antacids, smoking cessation and infant nutrition categories.

CHCI: CHCI segment reported net sales of $375 million, down 15% (declined 10% on a constant-currency basis) from the year-ago period. Excluding year-over-year contributions from the divested European distribution businesses and currency headwinds, organic net sales decreased approximately 2% due to lower sales of existing products.

Net sales of existing products decreased primarily due to lower sales in Germany and Belgium and discontinued products from divested businesses.

Prescription Pharmaceuticals (RX): The Prescription Pharmaceuticals segment also showed a sluggish performance during the quarter, with net sales declining 12% to $267 million, both on a reported and constant-currency basis. The dip in sales can be attributed to lower sales of Entocort due to competitive pressures and price erosion. Lower sales of existing products also affected revenues.

2017 Earnings Outlook Intact

Perrigo maintained its previously issued 2017 earnings outlook. The company continues to expect 2017 net sales in the range of $4.6 to $4.8 billion.

The company expects adjusted earnings per diluted share in the range of $4.15 to $4.50 in 2017.

Zacks Rank & Key Picks

Perrigo currently carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in healthcare sector include VIVUS, Inc. (NASDAQ:VVUS) , Bayer (DE:BAYGN) AG (OTC:BAYRY) and Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) . While VIVUS and Bayer sport a Zacks Rank #1 (Strong Buy), Regeneron carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

VIVUS’s loss per share estimates narrowed from 50 cents to 39 cents for 2017 in the last 30 days. The company posted positive earnings surprises in all four trailing quarters with an average beat of 233.69%.

Regeneron’s earnings per share estimates increased from $10.17 to $10.52 for 2017 and from $10.90 to $12.10, over last 30 days. The company posted positive earnings surprises in two of the four trailing quarters with average beat of 0.45%.

Bayer’s earnings per share estimates increased from $8.36 to $8.85 for 2017 and from $8.88 to $9.53 for 2018, over last 30 days. The company posted positive earnings surprises in three of four trailing quarters with average beat of 10.25%.

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