8. Perrigo Company plc (NYSE:PRGO)
52 Week Range: $23.89 – $34.60
Current Share Price: $24.30
Number of Hedge Fund Holders: 39
Analyst Upside Potential: 56.38%
Perrigo Company plc (NYSE:PRGO) provides over-the-counter (OTC) health and wellness products in the United States and Internationally. They develop and sell a wide range of self-care products that help people manage their health without needing a prescription including upper respiratory products, pain and sleep aids, skincare and personal hygiene products, and nutritional supplements.
The company sells its products under various renowned brand names, including Compeed, Mederma, Nasonex, and Coldrex.
Management has made notable advancements in its infant formula segment and is actively pursuing sustainable growth strategies for its United States store brand business. They dedicated significant resources to enhance their infant formula offerings, resulting in a positive impact on organic net sales and earnings per share. Specifically, their efforts contributed 5.3% in organic net sales and added $0.43 to earnings per share compared to the previous year.
During the second quarter of fiscal 2024, there was a notable decline in consumption of cough/cold and allergy products, attributed to lower seasonal incidences and inventory adjustments among its United States retailers. This decline negatively impacted net sales by approximately 10.7% year-over-year during the second quarter.
Management of Perrigo Company plc (NYSE:PRGO) has indicated that they might make strategic decisions to walk away from certain business segments that are diluting margins. The company made around $139 million in operating income, which is a 1.5% increase year-over-year by prioritizing core business and through its supply chain renovation strategy.
Looking ahead, management remains optimistic about its infant formula recovery and return to growth with its strategic measures focusing on improving margins and operational efficiency.
Meridian Contrarian Fund stated the following regarding Perrigo Company plc (NYSE:PRGO) in its Q2 2024 investor letter:
“Perrigo Company plc (NYSE:PRGO) is the leading in-store brand for consumer wellness and self-care products. The company endured several years of declining earnings due to what we believe was poor capital allocation by its previous management team, which chased growth through acquisitions outside of Perrigo’s core business. Our investment in Perrigo was inspired by a new management team that committed to pursuing realistic, steady growth rates within the core business, and delivering improved profitability and returns on capital. Despite reporting inline earnings results and maintaining annual guidance during the quarter, Perrigo stock has been weak. Market data and drug store company results have indicated a lower-than-average cough, cold, and allergy season that might be impacting short-term results. We increased our position as we believe the risk vs. reward is in our favor. In our view, Perrigo is well positioned for significant earnings growth in 2025 and beyond while trading at a current valuation of 10x current year earnings per share.”
