Why Is Perrigo (PRGO) Down 11% Since Last Earnings Report?

It has been about a month since the last earnings report for Perrigo (PRGO). Shares have lost about 11% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Perrigo due for a breakout? 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 drivers.

Perrigo Misses on Q4 Earnings, Beats on Sales

Perrigo reported fourth-quarter 2019 adjusted earnings of $1.06 per share, which missed the Zacks Consensus Estimate of $1.08. However, the bottom line increased 9.3% year over year.

Net sales increased 10.7% year over year to $1.32 billion, beating the Zacks Consensus Estimate of $1.3 billion by a slight margin. The year-over-year growth was mainly due to the addition of products from the recently closed Ranir acquisition and higher demand for existing products. Sales of $58 million from new products were partially offset by a loss of $9 million in sales from discontinued products. Sales rose 13.4% excluding the impact of foreign currency movement.

Segment Discussion

CSCA: Net sales of the segment in the fourth quarter of 2019 came in at $710.5 million, up 15.2% year over year, driven by higher sales of over-the-counter (“OTC”) and nutrition businesses, and $52 million of net sales from products added after the Ranir acquisition. Excluding net sales from exited businesses, additional sales from Ranir’s products and the impact of foreign currency movement, net sales at CSCA increased approximately 10.6%.

CSCI: The segment reported net sales of $356 million, up 8.2% from the year-ago period. The growth was driven by new product sales of $23 million, especially weight loss product XLS Forte 5, and $22 million of net sales from Ranir’s products, as well as higher sales from store brand business in the United Kingdom. Excluding net sales from Ranir’s products and the impact of foreign currency movement, sales increased 4.3%.

Rx Segment: Net sales of the segment increased 2.8% to $256 million. The upside can be attributed to new product sales of $19 million and higher volumes of existing products. The company lost $6 million in sales from discontinued products. Pricing pressure in this segment unfavorably impacted sales.

2020 Guidance

Perrigo provided its guidance for adjusted earnings and net sales in 2020. It expects adjusted earnings to be in the range of $3.95 to $4.15 per share. It anticipates net sales to grow 6-7% year over year in 2020. Organic growth, excluding foreign currency fluctuations,in net sales is expected to be approximately 3%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted -8.02% due to these changes.

VGM Scores

Currently, Perrigo has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Perrigo has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.