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Neogen (NEOG) Up 1.5% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Neogen Corporation (NEOG - Free Report) . Shares have added about 1.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is NEOG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Neogen reported earnings of 33 cents per share in the fourth quarter of fiscal 2018. The figure considersadjustment for a 4-for-3 stock split effective Dec 29, 2017.The bottom line beat the Zacks Consensus Estimate by 33.3% and increased 10% from the year-ago quarter’s tally.
Revenues increased 8.5% on a year-over-year basis to $109.3 million, ahead of the Zacks Consensus Estimate of $108 million.
For the full year, net income was $1.21 per share, 40.7% above the year-ago number. While the top line increased 11% annually to $402.3 million.
Per Neogen, revenues and net income for the fourth quarter and the full year established new all-time highs for the company.
Revenues in Detail
Food Safety Segment: Revenues at the segment totaled $52.1 million, up 7.9% on solid overall organic growth in the reported quarter. Full-year revenues increased 14% to $196 million, partly aided by the acquisitions of Quat-Chem and Rogama. There was a 13% growth in sales of test kits to detect drug residues in milk, partially driven by new test kits to detect drug residues of special concern in Eastern Europe.
The company witnessed 12% rise in sales of Neogen's rapid diagnostics to detect food allergens including gluten, milk, soy and peanuts in fiscal 2018. There was an 18% jump in sales of general sanitation products from the year-ago period. Sales of the foodborne pathogen detection tests increased 16% including a 27% improvement in the sale of tests to detect Listeria.
Animal Safety Segment: The segment recorded revenues of $57.1 million, reflecting a 13.1% climb from the year-ago quarter’s count. Fiscal 2018 revenues for this segment came in at $206.2 million, an 8.4% gain from the prior-year period’s level.
Full-year growth at the segment was mainly driven by a sales uptrend in the genomics business, an 11% rise in rodent control product line, 15% uptick in sales of animal care products along with a 13% raise in sales of drug detection products and a 23% hike in sales of detectable needles.
The worldwide genomics business unit recorded a 22% increase in fiscal 2018. Per management, this growth is attributable to the September 2017 buyout of the Neogen Australasia genomics laboratory in Australia. Also, the upside is backed by robust revenues grossed from the genomic testing of beef and dairy cattle, swine, poultry and companion animals at the other existing locations.
Margin Details
Gross margin contracted 219 basis points (bps) to 45.4% during the fourth quarter, largely riding on a 15.2% escalation in cost and an unfavorable product mix.
Adjusted operating income was $19.9 million, accounting for 18.2% of sales in the fourth quarter compared with $19 million or 19.2% of sales a year ago, which implies a 105-bps contraction.
Full-year gross margin was 47.3%, signifying a contraction of 30 basis points. According to Neogen, this was the impact of lower-margin revenues drawn from the consolidations of Quat-Chem and Rogama and the lower sales of higher-margin natural toxin kits, which partially offset the improved gross margins in the genomics business from lower raw material costs for both comparative periods.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, NEOG has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, NEOG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Neogen (NEOG) Up 1.5% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Neogen Corporation (NEOG - Free Report) . Shares have added about 1.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is NEOG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Neogen reported earnings of 33 cents per share in the fourth quarter of fiscal 2018. The figure considersadjustment for a 4-for-3 stock split effective Dec 29, 2017.The bottom line beat the Zacks Consensus Estimate by 33.3% and increased 10% from the year-ago quarter’s tally.
Revenues increased 8.5% on a year-over-year basis to $109.3 million, ahead of the Zacks Consensus Estimate of $108 million.
For the full year, net income was $1.21 per share, 40.7% above the year-ago number. While the top line increased 11% annually to $402.3 million.
Per Neogen, revenues and net income for the fourth quarter and the full year established new all-time highs for the company.
Revenues in Detail
Food Safety Segment: Revenues at the segment totaled $52.1 million, up 7.9% on solid overall organic growth in the reported quarter. Full-year revenues increased 14% to $196 million, partly aided by the acquisitions of Quat-Chem and Rogama. There was a 13% growth in sales of test kits to detect drug residues in milk, partially driven by new test kits to detect drug residues of special concern in Eastern Europe.
The company witnessed 12% rise in sales of Neogen's rapid diagnostics to detect food allergens including gluten, milk, soy and peanuts in fiscal 2018. There was an 18% jump in sales of general sanitation products from the year-ago period. Sales of the foodborne pathogen detection tests increased 16% including a 27% improvement in the sale of tests to detect Listeria.
Animal Safety Segment: The segment recorded revenues of $57.1 million, reflecting a 13.1% climb from the year-ago quarter’s count. Fiscal 2018 revenues for this segment came in at $206.2 million, an 8.4% gain from the prior-year period’s level.
Full-year growth at the segment was mainly driven by a sales uptrend in the genomics business, an 11% rise in rodent control product line, 15% uptick in sales of animal care products along with a 13% raise in sales of drug detection products and a 23% hike in sales of detectable needles.
The worldwide genomics business unit recorded a 22% increase in fiscal 2018. Per management, this growth is attributable to the September 2017 buyout of the Neogen Australasia genomics laboratory in Australia. Also, the upside is backed by robust revenues grossed from the genomic testing of beef and dairy cattle, swine, poultry and companion animals at the other existing locations.
Margin Details
Gross margin contracted 219 basis points (bps) to 45.4% during the fourth quarter, largely riding on a 15.2% escalation in cost and an unfavorable product mix.
Adjusted operating income was $19.9 million, accounting for 18.2% of sales in the fourth quarter compared with $19 million or 19.2% of sales a year ago, which implies a 105-bps contraction.
Full-year gross margin was 47.3%, signifying a contraction of 30 basis points. According to Neogen, this was the impact of lower-margin revenues drawn from the consolidations of Quat-Chem and Rogama and the lower sales of higher-margin natural toxin kits, which partially offset the improved gross margins in the genomics business from lower raw material costs for both comparative periods.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Neogen Corporation Price and Consensus
Neogen Corporation Price and Consensus | Neogen Corporation Quote
VGM Scores
At this time, NEOG has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, NEOG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.