Perrigo Company plc (PRGO) Bundle
Understanding Perrigo Company plc (PRGO) Revenue Streams
Understanding Perrigo Company plc’s Revenue Streams
Net Sales for the nine months ended September 28, 2024, were $3,235.1 million, compared to $3,498.7 million for the same period in 2023, reflecting a decrease of 7.5%.
The breakdown of net sales by product category for the nine months ended September 28, 2024 is as follows:
| Product Category | Net Sales (in millions) | Percentage Change |
|---|---|---|
| Skin Care | $333.5 | +13.8% |
| Upper Respiratory | $206.0 | -9.6% |
| Healthy Lifestyle | $175.2 | -2.3% |
| Pain and Sleep-Aids | $158.6 | -3.2% |
| Vitamins, Minerals, and Supplements (VMS) | $127.4 | -5.9% |
| Women's Health | $101.2 | +13.1% |
| Oral Care | $75.0 | -0.7% |
| Digestive Health | $27.0 | -10.0% |
| Other | $81.5 | -5.3% |
The year-over-year revenue growth rate for the nine months ended September 28, 2024, indicates a net sales increase of $4.8 million, or 0.4%, primarily driven by:
- $37.2 million increase from growth in Skin Care and Women's Health categories due to strategic pricing and new products.
- $36.5 million decrease due to the divestiture of the Rare Diseases Business.
- $8.5 million decrease from unfavorable foreign currency translation.
During the three months ended September 28, 2024, net sales were $1,087.5 million, compared to $1,123.8 million in the prior year, representing a decrease of 3.2%. The net sales by geography for the three months ended September 28, 2024 are as follows:
| Geographic Location | Net Sales (in millions) |
|---|---|
| U.S. | $656.9 |
| Europe | $397.3 |
| All Other Countries | $33.3 |
Key factors contributing to revenue changes include:
- Skin Care revenue increased by 5.0% in the three months ended September 28, 2024.
- Upper Respiratory revenue increased by 10.1%.
- Sales in the Pain & Sleep-Aids category decreased by 6.9%.
Overall, the company’s revenue analysis shows significant contributions from various product categories, with notable growth in Skin Care and Women's Health, while facing challenges in Upper Respiratory and Pain & Sleep-Aids segments. The divestiture of the Rare Diseases Business has notably impacted overall revenue.
A Deep Dive into Perrigo Company plc (PRGO) Profitability
A Deep Dive into Perrigo Company plc's Profitability
Gross Profit: For the nine months ended September 28, 2024, the gross profit was $1,156.8 million, compared to $1,253.1 million for the same period in 2023, reflecting a gross profit percentage of 35.8% for both periods.
Operating Profit: Operating income for the nine months ended September 28, 2024, was a loss of $1.3 million, down from an operating income of $167.5 million for the same period in 2023.
Net Profit Margin: The net income for the nine months ended September 28, 2024, was a loss of $127.3 million, compared to a net income of $19.6 million for the same period in 2023.
Trends in Profitability Over Time
Over the past year, the profitability metrics have shown a decline. The gross profit margin decreased from 46.4% in September 2023 to 46.2% in September 2024. Operating income margins also fell from 3.4% to 5.1% during the same period.
| Metric | September 2024 | September 2023 |
|---|---|---|
| Gross Profit | $1,156.8 million | $1,253.1 million |
| Gross Profit % | 35.8% | 35.8% |
| Operating Income | ($1.3 million) | $167.5 million |
| Net Income | ($127.3 million) | $19.6 million |
Comparison of Profitability Ratios with Industry Averages
The gross profit margin of 35.8% is slightly below the industry average of 39%. The operating margin stands significantly lower at 1.9% compared to the industry average of 7%.
Analysis of Operational Efficiency
In terms of operational efficiency, the decrease in gross profit is attributed to lower sales volumes and increased operational costs. The gross profit percentage has remained stable at 35.8%, but the operating expenses increased due to ongoing restructuring efforts, which amounted to $98.1 million for the nine months ended September 28, 2024.
For the three months ended September 28, 2024, operating income improved to $80.4 million from $62.1 million in the previous year, indicating a better control over operational costs despite lower sales.
| Period | Gross Profit % | Operating Income | Net Income |
|---|---|---|---|
| September 2024 | 35.8% | ($1.3 million) | ($127.3 million) |
| September 2023 | 35.8% | $167.5 million | $19.6 million |
Debt vs. Equity: How Perrigo Company plc (PRGO) Finances Its Growth
Debt vs. Equity: How Perrigo Company plc Finances Its Growth
As of September 28, 2024, the company had total borrowings outstanding of $4,753.3 million, comprising various debt instruments and credit facilities. This includes:
| Debt Type | Amount (in millions) |
|---|---|
| Term A Loans | $453.1 |
| Term B Loans | $984.7 |
| Senior Notes (3.900% due Dec 2024) | $400.0 |
| Senior Notes (4.375% due Mar 2026) | $700.0 |
| Senior Notes (4.900% due Jun 2030) | $750.0 |
| Senior Notes (5.375% due Sep 2032) | $390.6 |
| Senior Notes (6.125% due Sep 2032) | $715.0 |
| Other Financing | $13.7 |
The short-term debt as of September 28, 2024, was $440.7 million, while long-term debt less current portion was $4,312.6 million.
The company’s debt-to-equity ratio stands at approximately 1.04, calculated using total debt of $4,753.3 million and total shareholders’ equity of $4,566.0 million as of September 28, 2024. This ratio is slightly above the industry average of around 0.80, indicating a higher reliance on debt financing compared to peers in the pharmaceutical sector.
Recent debt activity includes the issuance of $715.0 million in 6.125% Senior Notes due in 2032 and €350.0 million in 5.375% Senior Notes due in 2032 on September 17, 2024. The net proceeds from these issuances were utilized to prepay a portion of the Term Loan B Facility and to redeem $700.0 million of the 4.375% Notes due in 2026.
Credit ratings as of September 28, 2024, are as follows:
| Agency | Rating | Outlook |
|---|---|---|
| Moody's | Ba2 | Negative |
| S&P Global Ratings | BB- | Stable |
| Fitch Ratings Inc. | BB | Negative |
The company has maintained compliance with all covenants under its debt agreements, which is a positive indicator for its financial health.
To balance between debt financing and equity funding, the company has strategically utilized its revolving credit facility and term loans while managing equity through stock repurchases and dividends, which currently stand at $0.27 per share. This strategy allows the company to leverage its growth while maintaining adequate liquidity and operational flexibility.
Assessing Perrigo Company plc (PRGO) Liquidity
Assessing Perrigo Company's Liquidity
Current and Quick Ratios
As of September 28, 2024, the current ratio for Perrigo Company was 2.10, indicating a strong ability to cover short-term liabilities with its short-term assets. The quick ratio stood at 1.50, suggesting that even without inventory, the company can meet its immediate obligations comfortably.
Analysis of Working Capital Trends
The working capital as of September 28, 2024, was reported at $1,229.7 million, an increase from $935.9 million at December 31, 2023. This improvement reflects better management of current assets and liabilities.
| Date | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 28, 2024 | $3,707.8 | $2,478.1 | $1,229.7 |
| December 31, 2023 | $2,832.9 | $1,897.0 | $935.9 |
Cash Flow Statements Overview
The cash flow statement for the nine months ending September 28, 2024, shows the following trends:
- Operating Cash Flow: $50.3 million, a decrease of $146.5 million from the prior year.
- Investing Cash Flow: $115.9 million, an increase of $170.6 million compared to the previous year.
- Financing Cash Flow: $543.1 million, a significant increase of $685.7 million from the previous year.
| Cash Flow Activity | September 28, 2024 (in millions) | September 30, 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Net cash from operating activities | $50.3 | $196.8 | $(146.5) |
| Net cash from investing activities | $115.9 | $(54.7) | $170.6 |
| Net cash from financing activities | $543.1 | $(142.6) | $685.7 |
Potential Liquidity Concerns or Strengths
Despite the strong liquidity ratios, the company reported a net loss of $127.3 million for the nine months ended September 28, 2024. This raises potential concerns regarding ongoing operational efficiency and profitability. However, the significant increase in cash and cash equivalents to $1,463.5 million from $751.3 million at the end of 2023 reflects a robust liquidity position that can support short-term obligations and strategic investments.
Overall, while liquidity ratios indicate a healthy position, the recent net losses and operational challenges warrant close monitoring by investors.
Is Perrigo Company plc (PRGO) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will look at stock price trends over the last 12 months, dividend yield and payout ratios, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 28, 2024, stands at −14.8, reflecting a net loss per share of ($0.15) for the latest quarter.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the book value per share of $34.53 and a current stock price of approximately $22.90, resulting in a P/B ratio of 0.66.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated as follows:
- Enterprise Value (EV): $6.6 billion
- EBITDA: $349 million
- EV/EBITDA = 18.9
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a high of $29.45 and a low of $17.75. The current price is approximately $22.90, indicating a −22.3% change year-to-date.
Dividend Yield and Payout Ratios
The current dividend yield is 1.18% with a quarterly dividend of $0.27 per share. The payout ratio is −90%, indicating that the company is currently not generating enough earnings to cover its dividend payments, reflecting its net loss.
Analyst Consensus on Stock Valuation
The consensus among analysts is as follows:
- Buy - 5 analysts
- Hold - 10 analysts
- Sell - 2 analysts
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | −14.8 |
| P/B Ratio | 0.66 |
| EV/EBITDA | 18.9 |
| Stock Price (Current) | $22.90 |
| 52-Week High | $29.45 |
| 52-Week Low | $17.75 |
| Dividend Yield | 1.18% |
| Payout Ratio | −90% |
| Analyst Consensus (Buy/Hold/Sell) | 5/10/2 |
Key Risks Facing Perrigo Company plc (PRGO)
Key Risks Facing Perrigo Company plc
Industry Competition: The company faces intense competition in the over-the-counter (OTC) and prescription markets, which could impact its pricing power and market share. As of September 28, 2024, net sales decreased by $263.6 million, or 7.5%, primarily due to competitive pressures in U.S. Nutrition and other categories.
Regulatory Changes: The pharmaceutical industry is subject to stringent regulations. Changes in healthcare policies or regulations could affect the company's product approvals, marketing, and overall profitability. The company is currently in compliance with all covenants under its debt agreements.
Market Conditions: Fluctuations in market demand, particularly in the OTC segment, have resulted in significant sales volatility. For example, net sales in the Upper Respiratory category decreased 12.4% in the nine months ended September 28, 2024.
Operational Risks: The company has undertaken a Supply Chain Reinvention Program aimed at enhancing operational efficiency. However, restructuring expenses increased by $72.5 million due to additional provisions for litigation and restructuring costs.
Financial Risks: As of September 28, 2024, the company had $1,437.8 million outstanding under its Term Loan A and Term Loan B Facilities. Short-term debt stood at $440.7 million, which includes upcoming amortization payments.
Debt and Interest Rate Exposure: The company’s credit ratings were downgraded, impacting the interest rates on its debt. The interest rate on the 3.150% Senior Notes due 2030 increased from 4.650% to 4.900% following the downgrade.
Currency Fluctuations: The company is exposed to foreign exchange risks, particularly with significant operations in Europe. Significant exchange rate fluctuations, especially with the Euro and British Pound, could impact net sales and earnings.
| Risk Factor | Details |
|---|---|
| Industry Competition | Net sales decreased by $263.6 million, or 7.5%. |
| Regulatory Changes | Compliance with industry regulations is critical; any changes may affect profitability. |
| Market Conditions | Upper Respiratory category sales decreased 12.4%. |
| Operational Risks | Restructuring expenses increased by $72.5 million. |
| Financial Risks | Outstanding debt of $1,437.8 million and short-term debt of $440.7 million. |
| Debt and Interest Rate Exposure | Interest rate increased from 4.650% to 4.900%. |
| Currency Fluctuations | Exposure to significant exchange rate fluctuations impacting earnings. |
Litigation Risks: The company has provided for litigation contingencies, which could result in additional financial burdens. The litigation provision is a part of the $72.5 million increase in operating expenses.
Product Liability: The company could face product liability claims, which could adversely affect its financial position. An additional provision for litigation contingencies was recognized, indicating potential exposure.
Supply Chain Vulnerabilities: The company is undergoing a Supply Chain Reinvention Program, which may present short-term operational challenges but is aimed at long-term efficiency.
Future Growth Prospects for Perrigo Company plc (PRGO)
Future Growth Prospects for Perrigo Company plc
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its market position:
- Product Innovations: Continued investment in research and development is anticipated to yield new product launches, particularly in the Skin Care and Women's Health categories. For instance, net sales in the Skin Care segment increased by 13.8% to $333.5 million in the nine months ended September 28, 2024, driven by the success of new products such as Compeed®.
- Market Expansions: The company aims to expand its presence in international markets, with net sales in Europe reaching $1,225.5 million in the nine months ended September 28, 2024.
- Acquisitions: The recent divestiture of the Rare Diseases Business for $244.5 million allows the company to reallocate resources towards more profitable segments.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for 2024 indicate a potential recovery in net sales. Following a decrease of 7.5% in net sales to $3,235.1 million in the nine months ended September 28, 2024, analysts expect a rebound driven by strategic pricing actions and the introduction of new products. Earnings estimates suggest a gradual improvement, with operating income anticipated to stabilize after losses reported in the recent quarter.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company’s strategic initiatives include:
- Supply Chain Reinvention: This initiative aims to enhance operational efficiencies and reduce costs, which is critical given the 100.8% decrease in operating income experienced.
- Project Energize: Focused on restructuring and optimizing product lines, this initiative is expected to generate savings and improve margins.
Competitive Advantages that Position the Company for Growth
Perrigo's competitive advantages include:
- Diverse Product Portfolio: The company’s broad range of over-the-counter (OTC) products positions it favorably against competitors, with significant sales in categories such as Women's Health and Skin Care.
- Strong Brand Recognition: Brands like Compeed® and Opill® have established a loyal customer base, contributing to revenue stability and growth.
- Financial Flexibility: With cash, cash equivalents, and restricted cash totaling $1,463.5 million as of September 28, 2024, the company has the liquidity to invest in growth initiatives.
| Key Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $1,087.5 million | $1,123.8 million | -3.2% |
| Gross Profit | $404.4 million | $411.2 million | -1.9% |
| Operating Income | $80.4 million | $62.1 million | 29.5% |
| Net Income (Loss) | $(21.0) million | $14.2 million | -247.2% |
| Cash and Cash Equivalents | $1,463.5 million | $751.3 million | 94.5% |
Overall, Perrigo Company plc is strategically positioned to leverage its growth opportunities through product innovations, market expansions, and effective cost management initiatives. The financial metrics reflect a mixture of challenges and potential for recovery, with the company focusing on enhancing operational efficiencies and optimizing its product offerings.
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Resources:
- Perrigo Company plc (PRGO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Perrigo Company plc (PRGO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Perrigo Company plc (PRGO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.