Last week, Phibro Animal Health (PAHC) reported fiscal first-quarter earnings that showed demand for their products remains strong. However, supply chain challenges and rising costs continue to pressure the bottom line. The company reported EPS of $0.21, vs. $0.26 last year, on an 8% increase in revenues, with EPS $0.05 below expectations.

The good news is the logistical challenges at one supplier that were hurting results have been resolved, and that the company’s recent investments to grow products, such as vitamins, is paying off. As a result, the company left its guidance unchanged for the June 2023 fiscal year in regard to revenues and operating income.

However, the company lowered EPS guidance for the fiscal year to between $1.21 and $1.31, down from $1.28 to $1.38. Higher interest expenses with rates rising as well as a higher tax rate due to changes in U.S. tax laws that now prevents the company from taking a credit on its Brazilian operations, are anticipated to hurt the company’s bottom line.

PAHC shares have dipped slightly since the report and are very cheap at 10.9X the midpoint of this year’s guidance. I believe PAHC is a good company despite its current difficulties, as it has niche products that play a vital role in help keeping the world fed by ensuring that livestock remain healthy. Still, I’m adjusting my buy under price and target for PAHC to reflect recent stock action. My new buy under price for PAHC is $16. My new target is $20.