Perrigo Sets EPS Target at $2.90–$3.10, Reaffirms Full-Year Guidance Amid Strategic Moves

Strategic Moves and Financial Performance

Patrick Lockwood-Taylor, President and CEO of Perrigo Company plc (PRGO), opened the earnings call by emphasizing progress on the company's Three-S Plan, which focuses on "Stabilize, Streamline and Strengthen One Perrigo." He noted that significant steps were taken in the second quarter to accelerate this plan. The infant formula business saw a 9% increase in net sales, driven by store brand formula. Additionally, new business awards outperformed previously disclosed lost businesses in store brand OTC, leading to share gains.

Lockwood-Taylor announced an agreement to sell the Dermacosmetics business for up to EUR 327 million, with EUR 300 million in cash upfront. This move is intended to sharpen the company’s strategic focus on its core portfolio. He also projected that high-growth brands could deliver between $100 million and $200 million in incremental net sales by 2027.

Ongoing initiatives such as Project Energize and the Supply Chain Reinvention program are on track and delivering substantial benefits. Lockwood-Taylor emphasized scaling the category-led market activation growth model and brand-building activities, noting that these efforts are beginning to show results.

Eduardo Guarita Bezerra, Executive VP & CFO, reported that the second quarter gross profit was $403 million, declining by $30 million year-over-year primarily due to an $18 million impact from divestitures and exited businesses. However, the second quarter earnings per share of $0.57 increased by 7.5% or 12.5% organically compared to the prior year, driven mainly by lower interest expense.

Outlook and Market Trends

Bezerra reaffirmed Perrigo's EPS target range of $2.90 to $3.10 per share, reflecting strong double-digit growth. He also confirmed the outlook for gross and operating margins for the full year. However, net sales growth is now expected towards the lower end of previously communicated ranges due to ongoing softness in OTC market consumption trends and slower-than-anticipated recovery in the infant formula business.

Lockwood-Taylor mentioned that the U.S. store brand has stabilized and is on track to grow net sales in the second half of the year.

Financial Highlights

Perrigo reported organic net sales growth in the second quarter that was flat compared to the prior year, including a 3.6% growth in OTC brands. Year-to-date organic growth was also flat but up nearly 1% when excluding the prior year Opill launch stocking benefit and previously disclosed lost distribution of lower-margin U.S. store brand products.

Bezerra cited a first-half gross margin of 39.5%, which aligns with the company's plan, and reiterated the expectation to deliver a full-year gross margin of approximately 40%, in line with the 2025 outlook. Operating income for the quarter was $135 million, with year-to-date operating income at $282 million. Year-to-date earnings per share of $1.17 grew 41% or 53.3% organically.

Year-to-date, Perrigo invested $45 million in capital expenditures and returned $80 million to shareholders through dividends. Cash at the end of the quarter was $454 million. Bezerra noted a gross increase to global cost of goods sold in the fourth quarter of approximately $10 million to $20 million and about $50 million to $60 million on a full-year basis due to tariffs. These increases will be offset by strategic pricing actions, in-sourcing to U.S.-based manufacturing facilities, and other supply chain measures.

Q&A and Analyst Insights

During the Q&A session, analysts raised several questions regarding infant formula trends, competitive activity, guidance phasing, pricing strategy, consumer trade-down trends, private label trends, and product scrap in infant formula. Lockwood-Taylor described the infant formula market as fluid and volatile, with brands promoting heavily to gain share. He noted that while store brand infant formula volume continues to grow, new volume entering the category has dampened share growth.

Regarding guidance phasing, Lockwood-Taylor stated that the EPS requirement for the second half is in line with the company's guidance. On pricing strategy, Bezerra mentioned that discussions with both OTC and Oral Care categories are progressing well, with the impact evenly split between them. He also noted that about two-thirds of the impact would come from pricing actions.

Lockwood-Taylor highlighted an acceleration in private label trends, stating that store brand OTC is gaining share, with volume and units accelerating. He also explained that the product scrap in infant formula was an isolated production issue, which was quickly addressed by the company's quality systems.

Sentiment and Risk Factors

Analysts pressed on the pace of infant formula recovery, EPS guidance, and pricing actions, reflecting a slightly cautious tone regarding the sustainability of share gains and the execution of the second-half plan. Management maintained a confident and measured tone, repeatedly reaffirming guidance and expressing confidence in operational initiatives.

Compared to the previous quarter, analyst questioning remained focused on execution and macro headwinds, while management emphasized resilience and proactive risk management. The current quarter saw a strategic divestiture of the Dermacosmetics business, sharpening the focus on core brands. Both quarters featured cautious top-line outlooks, but the current quarter guidance narrowed towards the lower end, reflecting continued softness in OTC consumption and a slower-than-anticipated infant formula recovery.

Management sentiment was consistently confident, with more explicit emphasis on the resilience of the business model and the ability to offset tariff headwinds. Analysts continued to focus on infant formula trends, pricing actions, and the visibility of guidance achievement, with little shift in skepticism or concern.

Final Takeaway

Perrigo management emphasized significant progress in executing its Three-S Plan, highlighted by the strategic divestiture of the Dermacosmetics business and ongoing strength in store brand and key OTC categories. While headwinds in consumer demand and infant formula recovery persist, the company reaffirmed its full-year EPS target of $2.90 to $3.10 per share and expressed confidence in delivering strong operating income growth with a balanced approach to risks and opportunities for long-term value creation.