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Neogen (NEOG) Q3 Earnings Miss Estimates, Gross Margin Expands
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Neogen Corporation (NEOG - Free Report) reported third-quarter fiscal 2024 earnings per share (EPS) of 12 cents, unchanged from the prior year’s comparable period figure. However, the reported figure missed the Zacks Consensus Estimate by 14.3%.
Revenues in the fiscal third quarter rose 4.8% on a year-over-year basis to $228.8 million. Core revenues were 6.2%. While acquisitions and discontinued product lines did not impact core growth, foreign currency had a negative impact of 1.4%. The metric missed the Zacks Consensus Estimate by 0.5%.
Segments in Detail
Within segments, Neogen registered Food Safety revenues of $157.8 million in the fiscal third quarter, marking a 4.1% improvement from the third-quarter 2023 figure. Our model projected the segment’s revenues to be $162.5 million for the third quarter.
The increase consisted of 5.8% core growth and 0.2% growth from acquisitions and discontinued product lines, offset by a negative foreign currency impact of 1.9%. The core revenue growth was led by the Indicator Testing, Culture Media & Other product category, which benefited from higher sales of Petrifilm, as well as sample handling and nutritional analysis products. However, this was partially offset by a decline in culture media sales, primarily due to a larger, one-time order in the prior-year period.
Neogen Corporation Price, Consensus and EPS Surprise
Revenues from Animal Safety were $71.1 million, up 6.5% year over year. This surpassed our model’s projected revenues of $67.3 million for the third quarter.
The increase consisted of 7% core growth, a 0.2% headwind from discontinued product lines and a negative foreign currency impact of 0.3%. The core growth was led by Neogen’s portfolio of biosecurity products, driven by new business wins and increased demand for cleaners, disinfectants and insect control products.
On a global basis, the Genomics business experienced a core revenue decline in the mid-single-digit range, reflecting a modest sequential improvement from the second quarter.
Margin Details
Neogen’s fiscal third-quarter gross profit increased 8.3% year over year to $116.9 million. The gross margin expanded 162 basis points (bps) to 51.1% despite a 1.5% increase in the cost of revenues.
Sales and marketing expenses rose 30.9% to $47.9 million, whereas administrative expenses increased 12.2% from the prior-year quarter to $52 million. R&D expenses were $4.9 million, down 33.1% year over year. Operating costs totaled $104.9 million, up 16.2% from the last year’s quarter. The operating margin fell 285 bps in the quarter under review.
Cash Position
Neogen exited the third quarter of fiscal 2024 with cash and cash equivalents of $161.4 million compared with $163.2 million at the end of the fiscal second quarter. The company’s non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.
Full-Year Guidance
Neogen provided an updated outlook for fiscal 2024.
The company anticipates full-year revenues between $910 million and $920 million (down from the previous guidance range of $935-$955 million). The Zacks Consensus Estimate is currently pegged at $938.1 million.
NEOG continues to expect capital expenditures to be approximately $130 million, which includes approximately $100 million related specifically to the integration of the former 3M Food Safety Division (unchanged).
Our Take
Neogen exited the third quarter of fiscal 2024 with both earnings and revenues lagging estimates. The company continues to manage operational inefficiencies stemming from the exit of the transition distribution agreement and the related increase in volumes in its primary distribution facility.
Moreover, a slower-than-anticipated recovery of order fulfillment rates is impacting its ability to meet end-market demand consistently, leading to a dismal updated revenue forecast for the fiscal year. Neogen posted a contraction of the operating margin in the quarter, which is discouraging as well.
On a positive note, the company’s revenues increased on a year-over-year basis. Neogen completed several milestone achievements related to the integration of the former 3M Food Safety business, including the relocation of the pathogen detection product line and the initial phases of the relocation of the sample handling product line. The ongoing positive trends in the end markets garner optimism for the company.
Insulet, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $1.40, beating the Zacks Consensus Estimate by 108.9%. Revenues of $509.8 million outpaced the consensus estimate by 10.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insulet has an estimated long-term earnings growth rate of 18.1% compared with the industry’s 11.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 100.1%.
Exact Sciences, carrying a Zacks Rank #2, reported a fourth-quarter 2024 loss of 27 cents, narrower than the Zacks Consensus Estimate of a loss of 53 cents. Revenues of $646.9 million outpaced the Zacks Consensus Estimate by 3.8%.
EXAS’ earnings are expected to surge 102.3% in 2025 compared to the industry’s 8%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 51.5%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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Neogen (NEOG) Q3 Earnings Miss Estimates, Gross Margin Expands
Neogen Corporation (NEOG - Free Report) reported third-quarter fiscal 2024 earnings per share (EPS) of 12 cents, unchanged from the prior year’s comparable period figure. However, the reported figure missed the Zacks Consensus Estimate by 14.3%.
Revenues in the fiscal third quarter rose 4.8% on a year-over-year basis to $228.8 million. Core revenues were 6.2%. While acquisitions and discontinued product lines did not impact core growth, foreign currency had a negative impact of 1.4%. The metric missed the Zacks Consensus Estimate by 0.5%.
Segments in Detail
Within segments, Neogen registered Food Safety revenues of $157.8 million in the fiscal third quarter, marking a 4.1% improvement from the third-quarter 2023 figure. Our model projected the segment’s revenues to be $162.5 million for the third quarter.
The increase consisted of 5.8% core growth and 0.2% growth from acquisitions and discontinued product lines, offset by a negative foreign currency impact of 1.9%. The core revenue growth was led by the Indicator Testing, Culture Media & Other product category, which benefited from higher sales of Petrifilm, as well as sample handling and nutritional analysis products. However, this was partially offset by a decline in culture media sales, primarily due to a larger, one-time order in the prior-year period.
Neogen Corporation Price, Consensus and EPS Surprise
Neogen Corporation price-consensus-eps-surprise-chart | Neogen Corporation Quote
Revenues from Animal Safety were $71.1 million, up 6.5% year over year. This surpassed our model’s projected revenues of $67.3 million for the third quarter.
The increase consisted of 7% core growth, a 0.2% headwind from discontinued product lines and a negative foreign currency impact of 0.3%. The core growth was led by Neogen’s portfolio of biosecurity products, driven by new business wins and increased demand for cleaners, disinfectants and insect control products.
On a global basis, the Genomics business experienced a core revenue decline in the mid-single-digit range, reflecting a modest sequential improvement from the second quarter.
Margin Details
Neogen’s fiscal third-quarter gross profit increased 8.3% year over year to $116.9 million. The gross margin expanded 162 basis points (bps) to 51.1% despite a 1.5% increase in the cost of revenues.
Sales and marketing expenses rose 30.9% to $47.9 million, whereas administrative expenses increased 12.2% from the prior-year quarter to $52 million. R&D expenses were $4.9 million, down 33.1% year over year. Operating costs totaled $104.9 million, up 16.2% from the last year’s quarter. The operating margin fell 285 bps in the quarter under review.
Cash Position
Neogen exited the third quarter of fiscal 2024 with cash and cash equivalents of $161.4 million compared with $163.2 million at the end of the fiscal second quarter. The company’s non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.
Full-Year Guidance
Neogen provided an updated outlook for fiscal 2024.
The company anticipates full-year revenues between $910 million and $920 million (down from the previous guidance range of $935-$955 million). The Zacks Consensus Estimate is currently pegged at $938.1 million.
NEOG continues to expect capital expenditures to be approximately $130 million, which includes approximately $100 million related specifically to the integration of the former 3M Food Safety Division (unchanged).
Our Take
Neogen exited the third quarter of fiscal 2024 with both earnings and revenues lagging estimates. The company continues to manage operational inefficiencies stemming from the exit of the transition distribution agreement and the related increase in volumes in its primary distribution facility.
Moreover, a slower-than-anticipated recovery of order fulfillment rates is impacting its ability to meet end-market demand consistently, leading to a dismal updated revenue forecast for the fiscal year. Neogen posted a contraction of the operating margin in the quarter, which is discouraging as well.
On a positive note, the company’s revenues increased on a year-over-year basis. Neogen completed several milestone achievements related to the integration of the former 3M Food Safety business, including the relocation of the pathogen detection product line and the initial phases of the relocation of the sample handling product line. The ongoing positive trends in the end markets garner optimism for the company.
Zacks Rank and Key Picks
Neogen currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Insulet (PODD - Free Report) , Exact Sciences (EXAS - Free Report) and Cardinal Health (CAH - Free Report) .
Insulet, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $1.40, beating the Zacks Consensus Estimate by 108.9%. Revenues of $509.8 million outpaced the consensus estimate by 10.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insulet has an estimated long-term earnings growth rate of 18.1% compared with the industry’s 11.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 100.1%.
Exact Sciences, carrying a Zacks Rank #2, reported a fourth-quarter 2024 loss of 27 cents, narrower than the Zacks Consensus Estimate of a loss of 53 cents. Revenues of $646.9 million outpaced the Zacks Consensus Estimate by 3.8%.
EXAS’ earnings are expected to surge 102.3% in 2025 compared to the industry’s 8%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 51.5%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.