Perrigo Company ((PRGO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Perrigo Company’s latest earnings call presented a mixed sentiment, highlighting both achievements and challenges. The company celebrated significant growth in its infant formula business and positive trends in the U.S. OTC store brand sector. Successful cost-saving initiatives and a strategic divestment were also noted. However, the call acknowledged a decline in gross margin and a slower-than-expected recovery in the infant formula segment, compounded by a soft consumer environment. Despite these hurdles, Perrigo expressed confidence in its future performance by reaffirming its full-year EPS outlook.
Infant Formula Business Growth
The infant formula business at Perrigo saw a net sales increase of 9%, primarily driven by store brand formulas. The company is making strides in reintroducing store brand SKUs, with 80% of the planned 2025 assortment already back on shelves, signaling a robust recovery strategy.
Positive Trends in U.S. OTC Store Brand
Perrigo’s U.S. OTC store brand segment showed promising trends, with new business awards surpassing lost distribution for the first time since 2024. Notably, sales of Perrigo allergy products rose by 19% year-to-date, despite a 2% decline in the overall category.
Project Energize and Supply Chain Reinvention
Project Energize is progressing well, with annual run rate gross savings reaching $159 million. Additionally, the supply chain reinvention program is on track to deliver between $150 million to $200 million in benefits by year-end, underscoring Perrigo’s commitment to operational efficiency.
EPS Growth and Outlook
Earnings per share (EPS) grew by 7.5% in the quarter, or 12.5% organically, with a year-to-date organic increase of over 50%. The company reaffirmed its full-year EPS outlook, reflecting confidence in sustained financial growth.
Strategic Sale of Dermacosmetics Business
Perrigo announced an agreement to sell its Dermacosmetics business for up to EUR 327 million. This move is aimed at sharpening the company’s strategic focus on its core portfolio and accelerating its net leverage goals.
Gross Margin Decline
The quarter saw a decline in gross margin, attributed to divested businesses and isolated production variability in the infant formula segment, which led to increased product scrapping.
Challenges in Infant Formula Recovery
The recovery of the infant formula business is progressing slower than expected, impacted by a significant decline in the Good Start brand due to lost distribution, presenting a challenge for Perrigo.
Soft Consumer Environment Impacting Sales
Organic net sales growth in the second quarter remained flat compared to the previous year, affected by declining total category consumption in the U.S. and slowing consumption in the EU.
Forward-Looking Guidance
In its Q2 2025 earnings call, Perrigo provided guidance on several financial metrics and strategic initiatives. Despite flat organic net sales growth for the second quarter, the company anticipates strong double-digit EPS growth for the full year, maintaining its EPS outlook of $2.90 to $3.10. The Three-S Plan (Stabilize, Streamline, Strengthen) remains a focus, with strategic divestments and investments in brand-building and innovation expected to drive future growth.
In summary, Perrigo Company’s earnings call reflected a balanced sentiment, acknowledging both achievements and challenges. The company’s strategic initiatives and reaffirmed EPS outlook suggest a positive trajectory despite current market softness and operational hurdles.