Phibro Animal Health Corporation PAHC is poised to grow in the upcoming quarters due to the strong performance of its Animal Health business. The company’s robust potential in emerging markets instills optimism. Also, the Vaccine business continues to prosper, with Phibro scaling up production at many locations. Yet, adverse macroeconomic impacts and a challenging competitive landscape pose risks to its operations.

In the past year, this Zacks Rank #1 (Strong Buy) stock has surged 71% compared with the industry’s 13.6% rise and the S&P 500 composite’s 17.8% growth.

The renowned animal health and mineral nutrition company has a market capitalization of $901.2 million. PAHC has an earnings yield of 8.7% compared to the industry’s yield of 1.5%. In the last reported quarter, Phibro delivered an earnings surprise of 27.1%.

Let’s delve deeper.

Factors at Play

Animal Health Business Growth Continues: Phibro’s key animal health products, including MFAs (Medicated Feed Additives) and nutritional specialty products, facilitate enhancing animal nutrition. Similarly, the company’s nutritional product offerings, such as OmniGen-AF and Animate, are used increasingly in the global dairy industry. The company also manufactures vaccines that protect animals from both viral and bacterial disease challenges. Moreover, PAHC is committed to developing its companion animal business and pipeline. These are key growth areas for Phibro both in the short and medium term, and it has been actively investing in these growth drivers to achieve its targets.

Phibro’s recent acquisition of the MFA product portfolio from Zoetis added more than 37 product lines sold across approximately 80 countries, six manufacturing sites in the United States, Italy and China. The company ended the fiscal second quarter with the Animal Health business experiencing 32.5% sales growth year over year, led by a robust 47% increase in MFA and other product sales due to a surge in both domestic and international demand.

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Potential in Emerging Markets: Phibro’s existing operations and established sales, marketing and distribution network in more than 80 countries provide it ample scope to take advantage of global growth opportunities. Outside the United States, Phibro’s global footprint extends to key high-growth regions (countries where the livestock production growth rate is expected to be higher than the average growth rate), including Brazil and other countries in South America, China, India and Southeast Asia, Mexico, Turkey, Australia, Canada, Poland and other Eastern European countries and South Africa and other countries in Africa. During the fiscal second quarter, the company’s operations in countries outside the United States contributed approximately 40.4% to its total revenues.

Prospering Vaccine Business:  Phibro is focusing on new developments, along with incremental registrations and growing volumes of existing vaccine technologies. The company also makes significant investments to expand vaccine manufacturing capacity at several locations. Recently, Phibro began operations at a new vaccine production facility in Guarulhos, Brazil, that manufactures and markets autogenous vaccines against animal diseases for swine, poultry and aquaculture. The vaccine business witnessed a robust 12% improvement in the second quarter of fiscal 2025, driven by a strong uptake across various regions, especially in Latin America.

Downsides for PAHC

Macroeconomic Concerns: In the current scenario, Phibro’s business is severely affected by economic sanctions, bans and broader military conflicts that result from the ongoing armed conflict between Russia and Ukraine. Other impacts include supply-chain and logistics disruptions, macroeconomic impacts from the exclusion of Russian financial institutions from the global banking system, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, as well as heightened cybersecurity threats. These could reduce Phibro’s profitability and negatively impact its overall financial performance.

Stiff Competition: Phibro faces competition from a substantial and continually evolving number of global and regional competitors. Phibro’s competitive position is based principally on its product registrations, customer service and support, breadth of product line, product quality, manufacturing technology, facility location and product prices. Moreover, consolidation continues to rise in the animal health market, which might work in favor of Phibro’s competitors.

PAHC Stock Estimate Trend

The Zacks Consensus Estimate for Phibro’s fiscal 2025 earnings per share (EPS) has moved up 19.1% to $1.93 in the past 30 days.

The Zacks Consensus Estimate for the company’s fiscal 2025 revenues is pegged at $1.28 billion. This suggests a 25.9% rise from the year-ago reported number.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH.

Masimo has an earnings yield of 2.5%, well ahead of the industry’s -3.6% yield. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 14.4%. Its shares have surged 44.8% compared with the industry’s 2.5% growth in the past year.

MASI sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boston Scientific, carrying a Zacks Rank #2 (Buy), has an earnings yield of 2.7% compared with the industry’s 1.4%. Shares of the company have rallied 52.5% compared with the industry’s 13.6% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.3%.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 10.7% compared with the industry’s 9.4%. Shares of the company have rallied 13.8% against the industry’s 1.4% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 9.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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