Core Insights - Perrigo Company plc is identified as one of the 12 cheap healthcare stocks to buy now [1] - The company specializes in over-the-counter and self-care products, generic prescription pharmaceuticals, and active pharmaceutical ingredients, with a strong presence in private-label consumer health products [2] Strategic Developments - Perrigo is advancing its strategic plan to "Stabilize, Streamline, and Strengthen" by divesting non-core businesses, including the sale of its Dermacosmetics branded business to KKR-managed Kairos Bidco AB for up to €327 million, expected to close in Q1 2026 [3] - This divestiture reflects the company's focus on its core self-care and private-label consumer health offerings [3] Leadership and Investor Engagement - Insider purchases by executives, including EVP Charles Atkinson and Chief Scientific Officer Lennox Abigail, totaling $23,200, indicate management's confidence in the company's growth prospects [4] - Senior management, including President and CEO Patrick Lockwood-Taylor, participated in the Barclays Global Consumer Staples Conference, emphasizing ongoing investor engagement and transparency regarding strategic direction and product pipeline [5]

Financial Data and Key Metrics Changes - Perrigo's organic net sales growth in Q2 was flat compared to the prior year, with OTC brand growth of 3.6% [9] - Year-to-date organic growth was also flat, but up nearly 1% excluding prior year benefits and lost distribution [9] - Gross margin declined due to divested businesses and isolated production variability in infant formula, with organic operating income growth at 28.3% year-to-date [11][30] - EPS in Q2 grew 7.5% or 12.5% organically, and year-to-date EPS increased by over 50% organically [12][35] Business Line Data and Key Metrics Changes - The infant formula business net sales grew 9%, driven by store brand formula, while the Good Start brand experienced a significant decline due to lost distribution [6][16] - Pain and sleep aids grew 8%, contributing to total growth, while upper respiratory products added 0.7 points primarily from new distribution [12][13] - OTC brands delivered organic net sales growth of 3.6% year-over-year, with Jungle Formula growing 14% and Compie achieving record share in several European markets [13][14] Market Data and Key Metrics Changes - Declining total category consumption in the U.S. and decelerating consumption in the EU limited top-line growth, but store brands gained share as consumers sought value [10] - Store brand OTC is gaining share, with Perrigo's allergy product sales up almost 19% at a key retailer despite overall category decline [20][64] - The company is seeing an acceleration in consumers trading down to private label products, with store brand OTC gaining volume and unit share [64] Company Strategy and Development Direction - The company is focused on its 3S plan: stabilize, streamline, and strengthen, with significant steps taken to enhance its self-care organization [5][8] - The sale of the derma cosmetics business for up to EUR 327 million is aimed at sharpening strategic focus on core high-growth brands [6][21] - The company is scaling its category-led market activation growth model to unlock portfolio potential and enhance brand building activities [7][23] Management's Comments on Operating Environment and Future Outlook - Management described the market as fluid and volatile, with heavy promotions from competitors impacting share growth expectations [44] - Despite challenges, the company remains confident in achieving its EPS target, needing only a 3% increase in the second half compared to the previous year [48][49] - The company reaffirmed its full-year EPS outlook, expecting strong double-digit growth despite anticipated lower net sales growth [38][90] Other Important Information - The company is on track to achieve its 2025 operating cash flow conversion target of approximately 100% to adjusted net income [36] - Net leverage to adjusted EBITDA is currently at 3.9x, with a target of approximately 3.5x by year-end [36][37] - The company plans to offset tariff impacts through strategic pricing actions and supply chain adjustments [40][63] Q&A Session Summary Question: Insights on the infant formula market and competitor responses - Management noted that the market is fluid with heavy promotions from brands, and while store brand volume continues to grow, share growth has been dampened by new entrants [44][45] Question: Building blocks for achieving guidance in the second half - Management confirmed that the EPS requirement for the second half aligns with guidance, with significant growth expected from new OTC store brand contracts and improved demand generation activities [51][53] Question: Strategic pricing actions and retailer conversations - Management indicated that discussions with retailers are positive, with expectations to offset tariff impacts through pricing actions across both branded and private label OTC [62][63] Question: Changes in expectations for Opill and marketing plans - Management expressed satisfaction with Opill's performance, noting double consumption and plans to continue targeted marketing to specific consumer cohorts [74][75] Question: Confidence in addressing increased product scrap in infant formula - Management reassured that the increased scrap was an isolated incident caught by quality systems, and confidence is high that it will not continue to impact margins [82][84] Question: Long-term guidance implications from updated expectations on infant formula - Management stated that while the ramp-up has been slower than expected, there is no change to long-term outlook, and efforts to rebuild market share continue [86][87]

Financial Data and Key Metrics Changes - Perrigo's organic net sales growth in Q2 2025 was flat compared to the prior year, with OTC brand growth of 3.6% [8][10] - Gross margin declined by 250 basis points, impacted by divested businesses and isolated production variability in infant formula [11][30] - EPS in the quarter grew by 7.5% or 12.5% organically, with year-to-date EPS growth exceeding 50% organically [12][34] Business Line Data and Key Metrics Changes - The infant formula business net sales grew by 9%, driven by store brand formula, while the Good Start brand experienced a significant decline due to lost distribution [6][16] - Pain and sleep aids grew by 8%, contributing positively to overall growth, while the digestive health category faced challenges due to lower consumption of proton pump inhibitors [12][14] - OTC brands delivered organic net sales growth of 3.6%, with Jungle Formula and Compie achieving significant market share gains [13][14] Market Data and Key Metrics Changes - Store brands are gaining share in volume and unit share as consumers seek value amidst economic uncertainty [10][12] - The U.S. market is experiencing declining total category consumption, while the EU is seeing decelerating consumption trends [10][11] - Perrigo's allergy product sales at a key retailer increased by almost 19% year-to-date, contrasting with a category decline of over 2% [19] Company Strategy and Development Direction - The company is focused on its 3S plan: Stabilize, Streamline, and Strengthen, with significant progress made in stabilizing the infant formula business and streamlining operations [5][26] - An agreement to sell the derma cosmetics business for up to EUR 327 million is expected to sharpen strategic focus on core high-growth brands [6][21] - The company aims to enhance its category-led market activation growth model to unlock portfolio potential and improve execution [22][23] Management's Comments on Operating Environment and Future Outlook - Management described the market as fluid and volatile, with heavy promotional activity from competitors impacting share growth expectations [44][45] - Despite challenges, the company remains confident in achieving its EPS target range of $2.9 to $3.1 per share, equating to strong double-digit growth [38][88] - Management acknowledged the slower-than-expected recovery in the infant formula business but emphasized ongoing demand generation efforts [46][84] Other Important Information - Year-to-date organic gross profit increased by 3.8%, primarily due to recovery in the infant formula business [31] - The company is on track to deliver a full-year gross margin of approximately 40% [30] - Operating cash flow for the year to date was $11 million, with cash on the balance sheet at $454 million [35][36] Q&A Session Summary Question: Insights on the infant formula market and competitor responses - Management noted that the market is fluid, with brands heavily promoting to gain share, and acknowledged that their shelf placement is not optimal at certain retailers [44][45] Question: Building blocks for achieving guidance in the second half - Management confirmed that the EPS requirement for the second half aligns with guidance, emphasizing confidence in OTC store brand growth and infant formula recovery [49][52] Question: Strategic pricing actions and retailer conversations - Management indicated that discussions with retailers regarding pricing are positive, with expectations to offset tariff impacts through pricing actions and supply chain adjustments [61][62] Question: Changes in expectations for Opill and marketing plans - Management expressed satisfaction with Opill's performance, noting double consumption growth and plans to continue investing in brand awareness [72][74] Question: Increased product scrap in infant formula and future confidence - Management clarified that the increased product scrap was an isolated issue caught by quality systems, and they are confident it will not continue to impact margins [80][82]