Opill meeting postponed (PRGO)
Perrigo said the FDA has postponed the meeting to review its application for Opill that was scheduled for November 18. The FDA said the delay was to review additional information requested for Opill. The PDUFA date has been extended for 90 days. The FDA has a goal to decide on applications in about ten months. The meeting of the advisory committee is generally held close to the end of the ten month review period, so the November 18 date was about six earlier than expected. Shifting the date back several months would still be an earlier schedule, so we are not going to read too much into it. Abortion on the ballot in two weeks is probably a more meaningful sign, but even that could be interpreted in each direction. Opill’s approval is likely the biggest source of EPS upside in 2023 and 2024, because it is not reflected.
Gas station strength (MNST, STZ)
Murphy USA reported gasoline gallons on a SSS basis increased by 9.0% in Q3, accelerating from 4.8% in Q2. Merchandise contribution sales grew 9.8%, accelerating from 6.6% in Q2. Food & Beverage sales increased by 9.4%, accelerating from 5.0% in Q2. Sales remained strong in October with per store volumes increasing by 10%. As Casey’s General Stores reported, competitively priced gasoline stations are taking share (along with club store owned stations) in the high-priced fuel environment. Despite the elevated prices of gasoline sales trends inside the stores have remained robust. Gas stations are a key channel for energy drinks and beer.
Reckitt's Q3 sales update (RKT-LON, HLN, PRGO)
Reckitt Benckiser Q3 LFL sales grew 7.4%, above consensus expectations of 6.1%. Nutrition LFL sales grew 24.7% driving better than expected sales growth. Health sales grew by 10.7% and Hygiene sales decreased by 1.2%. Hygiene faced difficult comparisons, but Lysol sales were still 50-60% above pre-pandemic levels. The company is also seeing “some softness in more discretionary categories” like air fresheners. However, management added, “In general, we are not seeing any material downtrading by consumers in our categories.” In the Health segment, OTC brands grew by 20%. “I don’t see any reason not to believe that there’s going to be a fairly strong cold and flu season, and we’re ready for it.” In the Nutrition segment, U.S. sales grew over 40% driven by the infant formula shortages which added 20%. Management expects the infant formula business to return to normal by year-end. Perrigo would be the beneficiary of downtrading, but also many of the same trends Reckitt is seeing.
Carton growth (STKL, ELO-OSL)
Elopak reported revenue growth of 26% in Q3. In the EMEA region organic revenue grew 13% YOY with price accounting for half the increase. In the Americas, revenue grew 50% and organic revenue grew 26% YOY. Growth was driven by juice and plant-based customers. In the Americas, the company’s aseptic rollout was delayed due to parts and components, but its first EMP 2-liter machine is in the market and supplying a European iced tea supplier. Elopak is a small producer of aseptic cartons used in plant-based milk and other beverages seeing strong demand growth. SunOpta is a better way to invest in plant-based milk.
