Neogen Corporation (NEOG - Free Report) reported adjusted earnings of 31 cents per share in the first quarter of fiscal 2018. The figure beat the Zacks Consensus Estimate by 3.3% and increased 19.2% from the year-ago quarter.
Revenues increased 13.9% on a year-over-year basis to $95.3 million, beating the Zacks Consensus Estimate of $95.0 million.
Food Safety Segment: Revenues at Neogen’s food safety segment totaled $46.7 million. Notably, revenues in the segment jumped 19.4% in the first quarter, with overall organic growth of 9%. Growth was majorly fueled by strength in a number of existing product lines and recent acquisitions. Furthermore, increased testing for toxins buoyed sales at the segment.
We also note that sales at the segment were driven by the 17% surge in sales of allergen tests for food such as gluten and peanuts, courtesy of the global food allergen regulatory’s efforts.
Animal Safety Segment: The animal safety segment recorded revenues of $48.5 million, reflecting an increase of 9.1% from the year-ago quarter. Growth at the segment was mainly driven by increased sales of the company's insect control product line along with rising sales of veterinary instruments, particularly in the needle and syringe product lines.
On the flipside, Neogen witnessed a decline in sales of cleaners and disinfectants, thanks to the termination of a distribution agreement in the third quarter of fiscal 2017.
Genomics Unit: The genomics business unit recorded a 29% increase on a year-over-year basis. Per management, growth in this business unit was fueled by expansion of the company's testing facilities in Scotland, development of new genomic testing products and the acquisition of Brazil-based Deoxi in early 2016.
Neogen Corporation Price, Consensus and EPS Surprise
Adjusted gross margin contracted 20 basis points (bps) to 48.2% in the quarter, largely due to mixed impacts from the acquisitions of Quat-Chem and Rogama.
Operating income was $16.4 million or 17.2% of sales in the first quarter, compared with $14.7 million or 17.6% a year ago.
We believe that Neogen is steadily progressing on the back of its four-pronged strategy. Also, we are encouraged by the accretive acquisitions and expanding international footprint which will drive Neogen’s overall results in fiscal 2018. Moreover, the company has a broad portfolio of innovative disinfectant products and more than 100 EPA and FDA-registered products, which strengthen the company’s global market position.
Zacks Rank & Key Picks
We note that Neogen carries a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Edwards Lifesciences Corporation (EW - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) )and Amedisys, Inc. (AMED - Free Report) . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while IDEXX and Amedisys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The company delivered a positive earnings surprise of 22.7% in the last reported quarter.
IDEXX has a long-term expected earnings growth rate of 19.8%. The company delivered a positive earnings surprise of 11.8% in the last reported quarter.
Amedisys has a long-term expected earnings growth rate of 18.2%. The company delivered a positive earnings surprise of 24% in the last reported quarter.
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