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Neogen (NEOG) Misses Q4 Earnings, Tops Revenue Estimates

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Neogen Corporation’s (NEOG - Free Report) fourth-quarter fiscal 2021 earnings per share (EPS) of 15 cents were flat with the year-ago quarter’s figure. It missed the Zacks Consensus Estimate by 6.3%.

Full-year EPS of 57 cents per share rose 1.8% from the year-ago 56 cents per share but missed the Zacks Consensus Estimate by 3.4%.

Revenues for the fiscal fourth quarter increased 16.8% on a year-over-year basis to $127.4 million despite the ongoing difficult global business environment. Revenues surpassed the Zacks Consensus Estimate by 2%. Per the company, the fourth quarter was the 116th of the past 122 quarters that Neogen reported revenue increases as compared to the same period in the previous year.

The company reported revenues of $468.5 million in fiscal 2021, up 12% from the year-ago period. The same beat the Zacks Consensus Estimate by 0.5%.

Segments in Detail

For the quarter, the company registered Food Safety revenues of $64.1 million, reflecting 18% (up 12% organically) year-over-year growth. The Megazyme acquisition strongly contributed to the company’s quarterly revenues. Further, growth was boosted by continued strong sales of the recently-launched Soleris Next Generation (NG) rapid microbial testing solution and increase in sales of natural toxin (up 10%) and allergen (up 19%) test kits as businesses began to rebound from the COVID-19 pandemic.

Neogen Corporation Price, Consensus and EPS Surprise

 

Neogen Corporation Price, Consensus and EPS Surprise

Neogen Corporation price-consensus-eps-surprise-chart | Neogen Corporation Quote

Animal Safety revenues in fiscal fourth quarter were $63.3 million, up 15.6% year over year. The upside can be attributed to strong growth in the veterinary instruments line (up 50%), primarily needles and syringes and the animal care line (up 51%), driven by significant spending on companion animal during the COVID-19 pandemic. Further, a 33% increase in sales of rodent control products and a 26% rise in insect control products, enhanced by revenues from the company's acquisition of the StandGuard product line in July 2020, contributed to the segment’s impressive performance.

Revenues from Neogen’s worldwide animal genomics business increased 21% in fiscal fourth quarter on a year-over-year basis. The upside was primarily driven by continued strength in companion animal testing services in the United States and Australia and new bovine and porcine business in China.

Neogen’s International business, which primarily reports through the Food Safety segment, increased 11% in fiscal 2021. Neogen’s U.K. business increased 4% in pounds in fiscal 2021 on strong sales of cleaners and disinfectants, partially offset by sluggish sales of diagnostic test kits due to the COVID-19 pandemic.

Neogen’s revenue from China for fiscal 2021 doubled on increased demand for biosecurity products due to African swine fever outbreaks. Neogen’s Latinoamerica business and its Brazilian operations grew 13% and 15%, respectively, in local currency for fiscal 2021.

Margin Details

Neogen’s fiscal fourth-quarter gross profit increased 11.5% year over year to $57.7 million. Yet, gross margin contracted 215 basis points (bps) to 45.3%.

Sales and marketing expenses rose 24.5% to $20.5 million, whereas administrative expenses rose 8.4% from the prior-year quarter to $12.9 million. Research & development expenses were $4.1 million, up 17.9% from the year-ago quarter. Operating costs totaled $37.4 million, up 17.8% year over year.

In the reported quarter, operating income was $20.3 million, up 1.6% from the year-ago quarter’s level. Nevertheless, operating margin contracted 239 bps to 15.9%.

Cash Position

The company exited fiscal fourth quarter with cash and investments of $381.1 million, up from $353.3 million at the end of the fiscal third quarter and $343.7 in the year-ago period. The company had no debt on the balance sheet at year-end.

Our Take

Neogen exited the fiscal fourth quarter on a mixed note with revenues beating and earnings missing the Zacks Consensus Estimate. The company witnessed strong growth across all segments, driven by enhanced sales of testing solutions, veterinary instruments and animal care line. Neogen’s solid domestic and international performance across all businesses buoys optimism. The Soleris NG and StandGuard product line also contributed to growth.

Contraction of both margins given the shift in product mix toward lower margin products, such as cleaners and disinfectants during the year, and increases in supply chain costs does not bode well.

Zacks Rank & Key Picks

Neogen currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks, which are supposed to report earnings soon, are AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

Catalent currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for first-quarter revenues is pinned at $1.13 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million. The company currently carries a Zacks Rank #2 (Buy).

Align Technology currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its second-quarter 2021 adjusted EPS is currently pegged at $2.56. The consensus estimate for its revenues stands at $937.5 million.