Prestige Consumer Healthcare Q4 Earnings Call Highlights

Key Points

• Prestige Consumer Healthcare missed fourth-quarter expectations as revenue fell 5% year over year, pressured by Clear Eyes supply constraints and shipping disruptions tied to Middle East conflict. Full-year revenue declined about 4%, and adjusted EPS came in at $4.38 versus $4.52 a year ago.
• Management said the eye care business remains the key near-term issue, but expects production improvements from the recently acquired Pillar5 facility to support recovery, especially in the back half of fiscal 2027. The company said the low end of its growth outlook assumes no improvement in eye care, while the higher end depends on increased output.
• Prestige guided fiscal 2027 to 1% to 3% organic revenue growth, adjusted EPS of $4.42 to $4.51, and at least $250 million in free cash flow. Longer term, it sees growth supported by acquisitions, with pending deals for Breathe Right and LaCorium Health not yet included in guidance.

Prestige Consumer Healthcare NYSE: PBH reported a weaker-than-expected fourth quarter as supply constraints in eye care and shipping disruptions tied to conflict in the Middle East weighed on sales, but management said it expects a return to organic growth in fiscal 2027 and outlined a multiyear outlook supported by acquisitions, cash flow and an eventual recovery in Clear Eyes.

Chairman, President and Chief Executive Officer Ron Lombardi said the company “experienced a challenging fourth quarter that fell short of expectations,” with full-year revenue declining approximately 4%. He cited a difficult consumer environment, global conflict and shipment disruptions late in the quarter.

For the fourth quarter, Chief Financial Officer and Chief Operating Officer Christine Sacco said revenue was $281.6 million, down 5% from $296.5 million a year earlier, or down 6.4% excluding foreign exchange. She said the decline was attributable to lower eye and ear care sales, primarily Clear Eyes supply constraints, as well as some international segment sales affected by Middle East shipping disruptions. The quarter also lapped an approximately $7 million benefit from the timing of certain e-commerce orders in the prior year.

For fiscal 2026, Prestige said organic revenue decreased 4.5%. North America segment revenue declined 4.9% excluding foreign exchange, while international OTC sales fell 2.8% excluding foreign exchange. Adjusted gross margin was 55.6%, roughly flat with 55.8% a year earlier. Adjusted diluted earnings per share were $4.38, compared with $4.52 in the prior year, as lower sales more than offset benefits from lower share count, interest expense, advertising and marketing, and other income.

Clear Eyes Supply Remains Central Issue

Management devoted significant attention to the company’s eye care business, particularly Clear Eyes. Lombardi said Clear Eyes sales were below expectations in the fourth quarter because of delayed shipments and production shutdowns ahead of line updates. Prestige acquired Pillar5, an aseptic eye care manufacturer, in December to gain more control over that portion of its supply chain.

Lombardi said Pillar5 had begun producing product on a new high-speed line, with plans for additional output in fiscal 2027. However, he also said the company remains focused on quality, noting that the decision to acquire Pillar5 was motivated by concerns about the previous owner’s ability to manage the facility and its quality environment.

In response to analyst questions, Lombardi said a shutdown expected to last about one week expanded as the scope of work grew, affecting the fourth quarter and creating a larger impact on the first quarter. Sacco said Prestige has hired additional staff and increased preventative maintenance practices, among other actions, but cautioned that near-term efforts to improve long-term output may contribute to period-to-period volatility.

Sacco said about two-thirds of the fourth-quarter revenue shortfall relative to guidance was related to eye care and about one-third was related to Middle East disruptions. For fiscal 2027, she said the low end of the company’s organic growth range assumes no improvement from fiscal 2026 in eye care, while the midpoint and high end assume increased production in the back half of the year, mainly from Pillar5.

Fiscal 2027 Outlook Calls for Organic Growth

Prestige projected fiscal 2027 revenue of $1.1 billion to approximately $1.12 billion, representing organic growth of about 1% to 3%. Lombardi said the outlook assumes solid consumption growth across the company’s portfolio despite a volatile consumer and economic environment, along with improved eye care shipment trends in the back half of the year.

The company forecast adjusted EPS of $4.42 to $4.51 and free cash flow of at least $250 million. For the first quarter, management expects revenue of about $250 million, roughly in line with the prior year, and adjusted EPS of $0.87, largely reflecting the timing of eye care supply.

Sacco said Prestige expects adjusted gross margin in fiscal 2027 to approximate fiscal 2026 levels, with first-quarter gross margin roughly flat sequentially versus the fourth quarter. The outlook includes incremental diesel costs tied to the Middle East conflict, though she said the company has historically taken actions to offset inflationary pressures. In response to an analyst question, Sacco said fiscal 2027 growth is expected to be driven about two-thirds by volume and one-third by price, with limited pricing similar to historical levels.

Management said the fiscal 2027 outlook does not include the pending Breathe Right or LaCorium Health acquisitions. Prestige expects to update its outlook after the acquisitions close.

Acquisitions Add to Growth Strategy

Lombardi highlighted two pending deals as important parts of the company’s growth strategy. Prestige is acquiring a portfolio of brands from Foundation Consumer Healthcare, led by Breathe Right, which Lombardi described as a “category-defining brand” in better breathing. He said Breathe Right is expected to generate more than $125 million in revenue and has opportunities for category growth and international expansion.

Prestige also announced the acquisition of LaCorium Health, an Australian company headquartered in the same office building as Prestige’s Care Pharmaceuticals team. Lombardi said LaCorium generates more than $40 million in sales and is led by the Dermal Therapy brand, which would become Prestige’s second-largest brand in Australia behind Hydralyte. LaCorium focuses on therapeutic skin care needs such as eczema and cold sores.

In response to analyst questions, Lombardi said LaCorium is primarily concentrated in Australia and New Zealand, with a small footprint in the U.S. and Canada. He said Prestige sees opportunities to expand into additional skin care conditions and to broaden international distribution, particularly in the Australasia region, by using existing distributor relationships. The company also expects to integrate LaCorium into its sales force and back-office operations to pursue revenue and cost synergies.

Phil Terpolilli, Vice President of Investor Relations, Treasury and Business Development, said Breathe Right had previously been described as approximately $0.25 accretive to annualized EPS, though that impact is not included in current guidance. He said LaCorium is expected to be approximately neutral to slightly positive to EPS.

Cash Flow and Capital Allocation

Prestige generated $246.4 million in free cash flow in fiscal 2026, up 1.3% from the prior year. Sacco said net debt was approximately $900 million at March 31, with a covenant-defined leverage ratio of 2.6 times. The company repurchased more than $150 million of shares during fiscal 2026 and invested $110 million in long-term eye care manufacturing capabilities.

Sacco said Prestige expects cumulative cash flow over the next three years to approach $900 million, including the estimated benefit of pending acquisitions. The company’s capital allocation priorities include investing in strategic brands, reducing debt after the Breathe Right and LaCorium deals close, and potentially returning to share repurchases in later years. Sacco said Prestige has more than $90 million remaining under its existing repurchase authorization.

Looking further out, Lombardi said the company sees catalysts from the pending acquisitions, international growth and improved eye care production. He said these factors position Prestige to deliver a sales compound annual growth rate approaching 10% through fiscal 2029 and an EPS CAGR of approximately 8% or more over the same period. Sacco later clarified that the revenue outlook includes organic growth in line with the company’s long-term 2% to 3% algorithm, plus the contribution from acquisitions, with potential upside as the acquisitions and eye care recovery develop.

Lombardi closed the call by saying Prestige remains confident in its strategy, citing its portfolio of leading consumer healthcare brands, free cash flow generation and capital deployment approach.

About Prestige Consumer Healthcare NYSE: PBH

Prestige Consumer Healthcare, Inc is a leading manufacturer and marketer of branded over-the-counter (OTC) healthcare products. The company focuses on developing, acquiring and commercializing a diverse portfolio of non-prescription remedies designed to address common consumer health needs, including pain relief, cold and cough, digestive health, eye care, skin care and women's health.

Key brands in Prestige's portfolio include Clear Eyes (eye health), Carmex (lip care), Chloraseptic (sore throat relief), Dramamine (motion sickness), Rolaids (antacid), Monistat (women's health), BC Powder (pain relief), Little Remedies (pediatric cold and gas relief) and TheraTears (dry eye therapy).

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