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Neogen (NEOG) Hits New 52-Week High: What's Driving It?

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Neogen Corporation (NEOG - Free Report) reached a new 52-week high of $92.98 on Apr 9 before closing the session marginally lower at $92.55. The stock has rallied 8.3% since its third-quarter fiscal 2021 earnings announcement on Mar 23.

The company is witnessing an uptrend in its stock price, prompted by a robust performance in both its Animal Safety and Food Safety segments during the fiscal third quarter, which in turn, is enabling it to gain a strong market share. Recent product launches hold strong prospects for the company’s growth, which raise optimism on the stock. However, tough competition is a cause for concern.

Key Growth Catalysts

Impressive Q3 Performance: During the fiscal third quarter, the company’s Animal Safety revenues were $58.3 million, up 18.1% year over year. This upside can be attributed to a 79% increase in sales of rodenticides within its product line including significantly higher sales in the U.S. Pacific Northwest of products. It registered Food Safety revenues of $58.4 million, reflecting 15.7% (up 11% organically) year-over-year growth.The acquisitions of international distributors in the second half of fiscal 2020 and Megazyme, a food quality diagnostics company, contributed to growth.

Neogen’s International business grew 16% in the reported quarter, partly owing to two months of sales from the Megazyme buyout. Revenues from Neogen’s worldwide animal genomics business rose 10% year over year, primarily led by a 19% improvement in sales in the global swine industry.

Collaborations: In March 2021, the company acquired the assets of Chile-based Magiar Chilena(Magiar), a distributor of food, animal and plant diagnostics comprising Neogen products. Neogen will integrate the Magiar assets into its wholly-owned subsidiary Neogen Chile SpA for continued operations in the country. Further, in January, the company purchased Ireland-based Megazyme, Ltd., a major supplier of analytical solutions utilized by quality control laboratories in the global food and beverage space. The takeover of Megazyme provides Neogen with a natural and complementary expansion of its food diagnostics portfolio while at the same time aligning with an aim to offer a comprehensive site of leading solutions to global food producers.

Last November, the company entered into a partnership with Transnetyx, Inc. to collaborate on distribution and advancement of the miniMUGA genotyping array (Mouse Universal Genotyping Array). Notably, Neogen intends to leverage Transnetyx’s wide-reaching footprint in the model organism community via this collaboration.

 

Product Launches: In February 2021, the company announced the unveiling of its Early Warning COVID-19 Testing for wastewater. Notably, this piloted, accurate and reliable test is expected to monitor the presence of the COVID-19 virus SARS-CoV-2 in sludge from wastewater facilities. Earlier in January, the company announced the launch of Reveal Q+ for the Aflatoxin M1 test, a faster and easier test to detect the presence of cancer-causing toxin aflatoxin M1. Last December, the company introduced the Igenity Canine Wellness, a preventative care DNA screening tool for veterinarians.

Downsides

Coronavirus Concern: Over the past few months, the coronavirus pandemic has wreaked havoc on the company’s stock. Neogen continues to be adversely impacted by the pandemic-led global market disruptions, especially in the food industry across some of its important end markets in the United States and Europe due to the lockdowns and social-distancing restrictions still in place. Neogen’s disinfectant sales declined 9% in third-quarter 2021, resulting from lower sales of water treatment products due to COVID restrictions.

Price Performance

In the past year, the stock has gained 48.6% compared with 23.4% growth of the industry.

Zacks Rank and Key Picks

Currently, Neogen has a Zacks Rank #3 (Hold). Some better-ranked stocks from the broader medical space are  HillRom Holdings (HRC - Free Report) , Surmodics (SRDX - Free Report) and Veeva Systems (VEEV - Free Report) . While Surmodics currently sports a Zacks Rank #1 (Strong Buy), the other two presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HillRom has a projected long-term earnings growth rate of 7.3%.

Surmodics has a projected long-term earnings growth rate of 10%.

Veeva has an estimated long-term earnings growth rate of 14.5%.

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