Shares of Perrigo (PRGO) declined 12.57% yesterday after the manufacturer of OTC pharmaceuticals’ second-quarter results came in below Wall Street expectations. Net sales and earnings missed estimates as the company adjusted to challenging times that impacted its sales mix, input costs, and channel dynamics.
Perrigo delivered net sales of $981 million, an increase of 3.4% year-over-year, but below consensus estimates of $1.02 billion. The increase was primarily driven by growth across most of its businesses and favorable currency movements.
Adjusted net income fell to $68 million, down from $82 million generated in the same quarter last year. Adjusted diluted earnings declined 15.3% year-over-year to $0.50 a share, compared to the $0.62 a share expected by the Street. According to CEO Murray S. Kessler, earnings declined due to increased investments in brand building and marketing.
The CEO is projecting a strong rebound in consumer takeaway in 2021, thus reaffirming the sales guidance for the full year. (See Perrigo stock charts on TipRanks)
Kessler stated, “Current consumer trends, along with an expected increase in cough/cold illnesses and the benefit of new products, are expected to result in higher volumes and accelerating growth, which will be compared to a weak year-ago second half.”
For the full year, the company expects organic sales to increase by 3%. Adjusted diluted earnings per share are expected at the lower end of the $2.50 to $2.70 range.
During the quarter, Perrigo completed the sale of its RX Pharmaceuticals business for $1.55 billion. Following the sale, the company is now a pure-play in the consumer self-care segment.
Last month, Raymond James Elliot Wilbur analyst reiterated a Hold rating on the stock after the Irish tax authority reduced the amount of tax that the company needs to pay.
“The new disclosure is clearly a plus, reducing the ultimate potential bill by some €660M, though it appears tied to technical aspects of the tax authorities claim, rather any willingness to budge on its position,” Wilbur said.
PRGO scores a 3 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to underperform market averages.
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