Morgan Stanley Downgrades Phibro Animal Health Corp. To Underweight

In a report published Tuesday, Morgan Stanley analysts downgraded

from Equal-Weight to Underweight. The price target is set to $35. The analysts said, however, that they were encouraged about the company's fundamental prospects, despite the downgrade. "We believe PAHC's strong stock performance (+100% vs. +21% DRG since IPO on Apr. 11, 2014) has been driven by greater appreciation for mgmt's ability to execute as a public company and easing concerns over the risk to animal antibiotics (MFAs)," the analysts stated. Morgan Stanley expects Phibro to witness modest EPS growth during 2015-2018, at a 3-year CAGR of 9 percent, driven by an "exhaustion of NOLs by 2018." The current downgrade was relative to Morgan Stanley's coverage universe, and "we are still constructive on the company's fundamentals," the analysts explained. The analysts expect the company to report results that exceed the estimates and the consensus in the event that demand is higher than expected. The company might also take part in industry consolidation and undertake external strategic action, which would offer higher-than anticipated upside to the stock.