Back to top

Image: Bigstock

Neogen (NEOG) Down 5.8% Since Last Earnings Report: Can It Rebound?

Read MoreHide Full Article

It has been about a month since the last earnings report for Neogen (NEOG - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Neogen due for a breakout? 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 Q1 Earnings and Revenues Surpass Estimates

NEOGEN’s first-quarter fiscal 2021 earnings per share of 30 cents exceeded the year-ago figure of 28 cents per share by 7.1%. It also outpaced the Zacks Consensus Estimate by 11.1%.

Revenues for the fiscal first quarter improved 7.8% on a year-over-year basis to $109.3 million despite the ongoing difficult global business environment. Revenues also surpassed the Zacks Consensus Estimate by 5.1%.

Segments in Detail

For the quarter, the company registered Food Safety revenues of $54.2 million, reflecting a 6.2% year-over-year growth due to higher sales of disinfectants, hand sanitizers and insecticides at NEOGEN’s international locations. The segment also benefited from the company’s latest Soleris NG automated microbial system that was launched in July. Robust customer acceptance of NEOGEN’s Listeria Right Now system led to 9% sales growth of the system from the year-ago quarter.

NEOGEN’s revenues for the Food Safety segment from the U.K. rose 21% in U.S. dollars due to strong sales of hand sanitizers, cleaners and disinfectants. The segment’s revenues from China more than doubled due to gains in sales across the group’s entire product portfolio, particularly biosecurity products, due to the country’s continuous fight against the COVID-19 pandemic and African swine fever. Segment revenues from India increased 10% in U.S. dollars. However, its revenues from Brazil reflected only 1% growth in U.S. dollars despite strong revenues in local currencies due to currency translations. Segment revenues from Mexico were down 2% in U.S. dollars despite strong revenues in local currencies.

Animal Safety revenues for the fiscal first quarter were $55.1 million, reflecting a 9.4% year-over-year increase backed by 47% growth in sales of its rodenticides, a 12% rise in genomics services in North America and Australia, along with a 6% improvement in sales of domestic insecticides. Notably, insecticides revenues included revenues from the Aug 3 acquisition of the U.S. rights to Elanco’s StandGuard Pour-on for horn fly and lice control in beef cattle.

Revenues from NEOGEN’s worldwide animal genomics business increased 11% for the first quarter of fiscal 2021 from the comparable year-ago period. This was primarily due to the company’s accelerating growth in companion animal genetic testing and recent launch of a new genomic test for whiteleg shrimp. However, this was partially offset by lower sales into the commercial dairy and beef markets due to persistently poor economic conditions as well as supply chain issues resulting from the COVID-19 outbreak.

Margin Details

NEOGEN’s fiscal first-quarter gross profit improved 4.4% year over year to $50.3 million. However, gross margin contracted 151 basis points (bps) to 46%.

Sales and marketing expenses fell 5.9% to $16.5 million, whereas administrative expenses rose 2.9% from the prior-year quarter to $11 million. Research & development expenses were $3.9 million, up 5.2% from the year-ago quarter. Operating costs totaled $31.4 million, reflecting a reduction of 1.6% year over year.

For the reported quarter, operating income was $18.9 million, which improved 16.2% from the year-ago period. Operating margin expanded 125 bps to 17.3%.

Cash Position

The company ended fiscal first-quarter 2021 with cash and investments of $367.5 million, reflecting an improvement from $343.7 million at fiscal 2020-end. It had no debt on the balance sheet at quarter-end.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Neogen has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Neogen has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Neogen Corporation (NEOG) - free report >>

Published in