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Here's Why You Should Hold on to NEOGEN (NEOG) Stock for Now

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NEOGEN Corporation (NEOG - Free Report) is well poised for growth in the coming quarters, backed by its slew of product launches and collaborations. Strong revenues in fiscal third quarter of 2021, along with its impressive international performance, buoy optimism. However, downsides may result from persistent pandemic-led business disruptions and a stiff competitive landscape.

Over the past year, the Zacks Rank #3 (Hold) stock has gained 52.4% compared with 20.6% growth of the industry and 51.7% rise of the S&P 500.

The renowned food and animal safety products provider has a market capitalization of $4.88 billion. The company projects 10% growth for the next five years and expects to maintain strong segmental performance. The company surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average surprise being 0.20%.

Let’s delve deeper.

Strong Q3 Results: NEOGEN’s impressive revenue performance in the third quarter of fiscal 2021 buoys optimism. The company’s segmental performance was primarily boosted by enhanced sales of cleaners and disinfectants to meet requirements created by the coronavirus pandemic. NEOGEN’s international performance was impressive as well, despite the challenging global business climate.

Acquisitions of international distributors and Megazyme, a food-quality diagnostics company, also contributed to growth. Expansion of both margins looks encouraging.

Product Launches: We are upbeat about the slew of product launches by NEOGEN over the recent months. The company, in February, relaunched its popular ThyroKare (levothyroxine sodium tablets), USP, which are approved by the FDA for replacement therapy for diminished thyroid function in dogs. During the same month, the company launched Early Warning COVID-19 Testing for wastewater.

In January, NEOGEN 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.

Partnerships and Acquisitions: We are optimistic about the series of partnership and buyout deals inked by NEOGEN of late. The company, in January, acquired Ireland-based Megazyme, Ltd. — a major supplier of analytical solutions used by quality control laboratories in the global food and beverage industry.

NEOGEN entered into a partnership with Transnetyx, Inc. in November 2020 to collaborate on distribution and advancement of the miniMUGA genotyping array (Mouse Universal Genotyping Array).


Persistent Coronavirus Concerns: NEOGEN continues to be adversely impacted by the pandemic-led global market disruptions, especially in the food industry, in some of its important end markets in the United States and Europe due to still-in-place lockdowns and social-distancing restrictions. NEOGEN’s cleaner and disinfectant sales significantly declined over the recent months, resulting from lower sales of water treatment products due to COVID-19 restrictions.

Tough Competitive Landscape: NEOGEN faces stiff competition from small businesses as well as large multinational companies. Some of these organizations have substantially greater financial resources than the company. Historically, NEOGEN has faced intense competition resulting from the development of new technologies by the company’s competitors, which could affect marketability and profitability of NEOGEN’s products.

Estimate Trend

NEOGEN has been witnessing a negative estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.7% south to $1.17.

The Zacks Consensus Estimate for fourth-quarter fiscal 2021 revenues is pegged at $124.9 million, suggesting a 14.5% rise from the year-ago reported number.

Key Picks

Some other better-ranked stocks from the broader medical space are AmerisourceBergen Corporation (ABC - Free Report) , Cantel Medical Corp. and DENTSPLY SIRONA Inc. (XRAY - Free Report) .

AmerisourceBergen’s long-term earnings growth rate is estimated at 11.4%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cantel’s long-term earnings growth rate is estimated at 19%. It currently carries a Zacks Rank #2.

DENTSPLY SIRONA’s long-term earnings growth rate is estimated at 20%. It currently carries a Zacks Rank #2.

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