
Elanco Animal Health Suprises to Upside Following Mixed Commentary from Animal Health Peers, Concerns Over Declining Vet Visits
11-7-23 (by: Scott Gleason) Elanco Animal Health has released its financial results for the third quarter of 2023 reporting total revenue of $1,068 million, reflecting a 4% increase on a reported basis. Consensus forecasts were looking for revenue of $1.04 billion and after mixed results from Elanco’s peers and commentary on declining vet trends, the results were a positive surprise to investors. Management noted 4% price growth in the quarter with volume up 1%. The company noted that its sees stabilization in its portfolio products and Elanco is expanding its U.S. pet health sales team by 25%, in concert with similar expansions from competitor IDEXX. The company also noted positive results from increased focus of hybrid online and direct sales.
Pet Health revenue reached $495 million, with a 6% growth and within Pet Health, the third quarter performance was driven by a 4% increase in price, improved market conditions in Europe affecting parasiticides, and better vaccine supply in the U.S. The company highlighted its Advantage® Family of products and Seresto®, which contributed $103 million and $41 million, respectively.
In Farm Animal, a 3% revenue increase was reported The growth was primarily attributed to revenue from new products, led by Experior, price increases, and strength in European poultry sales. However, this was partially offset by regulatory changes affecting cattle implant products and the timing of poultry rotations in the U.S.
From a profitability perspective, adjusted EPS were $0.18 versus street estimates of $0.12. Management noted some inflationary cost pressures and expects higher currency headwinds for the full year.
Elanco’s financial guidance for the full year 2023 was updated as a reflection of the strong third-quarter performance. The company is now calling for revenue of $4,360 to $4,400 million, with constant currency growth improving to flat to 1%. Adjusted EPS are expected to be $0.88 to $0.94 and adjusted EBITDA is expected to be $965 to $1,000 million. The company’s net leverage ratio is expected to be between 5.5x and 5.8x Adjusted EBITDA at the end of 2023.
Jeff Simmons, Elanco’s President and CEO, highlighted the company’s strong third quarter performance across both pet health and farm animal segments. He emphasized the role of innovation, a diverse portfolio, and global omnichannel execution in achieving a constant currency revenue growth of 5%.