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Why Is Neogen (NEOG) Up 0.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Neogen (NEOG - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Neogen 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.

NEOGEN’s Q4 Earnings Top, Revenues Miss Estimates

NEOGEN’s fourth-quarter fiscal 2020 earnings per share of 31 cents exceeded the year-ago figure as well as the Zacks Consensus Estimate by a penny.

For the full year, the company reported $1.13 of earnings per share, a 1.7% decline from the year-ago figure. However, it exceeded the Zacks Consensus Estimate by 1.8%.

Revenues in the fourth quarter declined 0.6% on a year-over-year basis to $109.1 million, missing the Zacks Consensus Estimate by 1.69%.

Fiscal 2020 revenues were $418.2 million, up 1% from the year-ago period. However, it lagged the Zacks Consensus Estimate by 0.4%.

Segments in Detail

In the quarter, the company registered Food Safety revenues of $54.3 million, a 3.7% drop year over year, significantly affected by the currency impacts of the stronger dollar, a slowdown in the global restaurant and food service industries and disruption of the global food supply.

Animal Safety revenues in the fourth quarter were $54.8 million, a 3% increase year over year backed by strong sales of cleaners, disinfectants and sanitizers used in the fight against COVID-19.

Margin Details

Gross margin expanded 139 basis points (bps) to 47.4% in the fiscal fourth quarter. The improvement was driven by opportunistic sales of sanitizers and disinfectants in response to COVID-19 and continued strength in genomic service revenues, in particular to the companion animal market.

Sales and marketing expenses fell 7.4% to $16.5 million, whereas administrative expenses rose 13.4% to $11.9 million. Research & development expenses were $3.5 million, down 3.1%. All these expenses culminated into operating costs of $31.8 million, a reduction of 0.4% year over year.

During the reported quarter, operating income was $19.9 million, which improved 6.4% from the year-ago quarter. Operating margin expanded 122 bps to 18.2%.

Cash position

The company ended the fiscal with cash and investments of $343.7 million, an improvement from the year-ago $267.5 million. The has no debt in its balance sheet.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, Neogen has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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.

Outlook

Neogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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