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Perrigo (PRGO) Q1 Earnings Miss, Margins Hurt by Higher Costs

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Perrigo Company plc PRGO 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.

Shares of Perrigo have declined 17% so far this year compared with the industry’s decrease of 22.3%.

Zacks Investment Research
Zacks Investment Research


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Segment Discussion

Perrigo reports its results under the following segments — Consumer Self Care Americas (“CSCA”) and Consumer Self Care International (“CSCI”).

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%-8% to 8%-9%.

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.

Perrigo Company plc Price, Consensus and EPS Surprise

Perrigo Company plc Price, Consensus and EPS Surprise
Perrigo Company plc Price, Consensus and EPS Surprise

Perrigo Company plc price-consensus-eps-surprise-chart | Perrigo Company plc Quote

Zacks Rank and Stocks to Consider

Currently, Perrigo carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the pharma/biotech sector include Alkermes ALKS, Galapagos GLPG and Aeglea BioTherapeutics AGLE. While Alkermes sports a Zacks Rank #1 (Strong Buy), Galapagos and Aeglea carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes’ loss per share estimates have improved from 14 cents to 3 cents for 2022 in the past 60 days. ALKS has gained 15.9% so far this year.

Alkermes delivered an earnings surprise of 350.48%, on average, in the last four quarters.

Estimates for Galapagos have narrowed from a loss of $3.53 to $3.36 for 2022 in the past 60 days. GLPG has risen 4.7% so far this year.

Galapagos delivered an earnings surprise of 40.80%, on average, in the last four quarters.

Aeglea’s loss per share estimates have improved from $1.51 to $1.33 for 2022 in the past 60 days. AGLE has declined 69.1% so far this year.

Aeglea delivered an earnings surprise of 9.47%, on average, in the last four quarters.


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