Why Is Perrigo (PRGO) Up 13.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Perrigo (PRGO). Shares have added about 13.4% in that time frame, outperforming the S&P 500.

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

Perrigo Q1 Earnings Miss Estimates, Sales Beat

Perrigo reported first-quarter 2022 adjusted earnings of 33 cents per share, which missed the Zacks Consensus Estimate of 42 cents. Earnings decreased 34% year over year. The decline in earnings was due to unfavorable currency movements and higher costs, partially offset by higher sales volumes and improved pricing. The company’s adjusted operating margin was primarily hurt due to cost headwinds, including higher cost of goods sold.

Net sales increased 6.4% year over year to $1.07 billion, beating the Zacks Consensus Estimate of $1.06 billion. The year-over-year increase was driven by a continued strong rebound in sales of cough/cold products globally and higher demand for infant formula in the United States. These were partially offset by unfavorable currency movements and lower sales in Ukraine and Russia. Organic net sales were up 9.7% year over year.

Segment Discussion

CSCA: Net sales of the segment in the first quarter of 2022 came in at $710 million, up 10.9% year over year. Sales increased due to a strong rebound in cough/cold sales and higher sales of oral allergy products, children's analgesics products, store brand infant formula, and Vitamins, Minerals, and Supplements products. This was partially offset by lower sales from Skincare & Personal Hygiene, Healthy Lifestyle and Oral Care products.

CSCI: The segment reported net sales of $365 million, down 1.4% from the year-ago period. Currency movements had an unfavorable impact of 9.1% on sales growth. Organically sales increased 7.7%. Sales were driven by higher store brand consumption in the United Kingdom and cough/cold products, partially offset by lower sales of products from Oral Care, Healthy Lifestyle, Skincare & Personal Hygiene and VMS categories. Sales were negatively impacted by unfavorable currency movement.

2022 Guidance Raised

Perrigo increased its earnings and revenue guidance for 2022. The company now expects adjusted earnings per share to be in the range of $2.30-$2.40, up from $2.10 to $2.30. It now expects revenues in 2022 to grow 8.5%-9.5%, compared with the previous guidance of 3.5% to 4.5%. The company raised its top-and bottom-line guidance primarily to reflect the impact of the HRA acquisition, which was completed in April.

The company also raised its guidance for organic growth from the range of 7 to 8.

Perrigo expects the acquisition of HRA to add approximately 35 cents to the bottom line, which is likely to be partially offset by approximately 10 cents due to unfavorable currency movements and approximately 5 cents due to higher interest expense from refinancing. Perrigo has stopped the distribution of its products in Russia, possibly due to the ongoing war with Ukraine, which is anticipated to have a negative impact of 5 cents on adjusted EPS.

The company expects its margins to be better in the second half of 2022 compared with the first half.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Perrigo has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Perrigo has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Perrigo is part of the Zacks Medical - Products industry. Over the past month, NuVasive (NUVA), a stock from the same industry, has gained 3.8%. The company reported its results for the quarter ended March 2022 more than a month ago.

NuVasive reported revenues of $290.76 million in the last reported quarter, representing a year-over-year change of +7.2%. EPS of $0.54 for the same period compares with $0.37 a year ago.

For the current quarter, NuVasive is expected to post earnings of $0.56 per share, indicating a change of -6.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for NuVasive. Also, the stock has a VGM Score of A.

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