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NEOGEN's (NEOG) Earnings Miss Estimates in Q3, Margins Up
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NEOGEN Corporation’s (NEOG - Free Report) third-quarter fiscal 2021 earnings per share (EPS) of 25 cents increased from the year-ago quarter’s figure of 23 cents per share by 8.7%. It lagged the Zacks Consensus Estimate by 7.4%.
Revenues for fiscal third quarter increased 16.9% on a year-over-year basis to $116.7 million despite the ongoing difficult global business environment. Revenues surpassed the Zacks Consensus Estimate by 9%.
Segments in Detail
For the quarter, the company 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 (on Dec 30) — a food quality diagnostics company — contributed to growth. The segment’s increase was led by a 14% improvement in sales of its diagnostic test kits to detect natural toxins in food and animal feed, including increases in sales of its aflatoxin test kits (up 25%).
Animal Safety revenues in fiscal third quarter were $58.3 million, up 18.1% year over year. The upside can be attributed to 79% increase in sales of rodenticides throughout its product line, including significantly higher sales in the U.S. Pacific Northwest of products.
NEOGEN’s International business increased 16% in the reported quarter, partly owing to two months of sales from the Megazyme acquisition. NEOGEN’s U.K. business increased 4% in pounds as lower economic activity caused by the pandemic resulted in sluggish sales performance across the organization. However, this increase was 9% when converted to U.S. dollars.
NEOGEN’s revenue from China for the current quarter was more than doubled driven by increased sales of disinfectant products, and greater sales of swine and dairy genomic services. NEOGEN Latinoamerica business based on Mexico grew 14% in the reported quarter in local currency.
Neogen Corporation Price, Consensus and EPS Surprise
NEOGEN Australasia’s quarterly revenues rose 73% in local currency, aided in part by the February 2020 acquisition of a food safety distributor. NEOGEN Brazil’s revenues rose 12% in local currency on strength in diagnostic kit sales, but declined 11% after translation of the Brazilian real to U.S. dollar.
In fiscal third quarter, revenues from NEOGEN’s worldwide animal genomics business increased 10% year over year. The upside was primarily led by 19% increase in sales in the global swine industry, as producers rebuilt their herds that were devastated by African swine fever, especially in China.
Margin Details
NEOGEN’s fiscal third-quarter gross profit increased 18.8% year over year to $53.8 million. Gross margin expanded 75 basis points (bps) to 46.1%.
Sales and marketing expenses rose 5.8% to $18.7 million, whereas administrative expenses rose 40.4% from the prior-year quarter to $15.1 million. Research & development expenses were $4.2 million, up 10.8% from the year-ago quarter. Operating costs totaled $38.1 million, up 17.9% year over year.
In the reported quarter, operating income was $15.8 million, up 20.9% from the year-ago quarter’s level. Nevertheless, operating margin expanded 46 bps to 13.5%.
Cash Position
The company ended fiscal third-quarter 2021 with cash and investments of $353.3 million, up from $343.7 million at the end of the fiscal second quarter. The company had no debt on the balance sheet at quarter-end.
Our Take
NEOGEN exited the fiscal third quarter on a mixed note with better-than-expected revenues and earnings lagging the Zacks Consensus Estimate. The company witnessed growth in its segmental performance, primarily boosted by enhanced sales of cleaners and disinfectants to meet the requirements created by the coronavirus pandemic. NEOGEN’s international performance was impressive 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.
However, drop in revenues from Brazil due to foreign exchange translations is disappointing. Rise in operating costs is a concern.
Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Worldwide sales of $10.7 billion in the quarter outpaced the consensus mark by 7.9%.
Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%. Revenues of $1.61 billion were in line with the Zacks Consensus Estimate.
Hill-Rom reported first-quarter fiscal 2021 adjusted EPS of $1.53, beating the Zacks Consensus Estimate by 45.7%. Revenues of $741.1 million surpassed the consensus mark by 13.2%.
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NEOGEN's (NEOG) Earnings Miss Estimates in Q3, Margins Up
NEOGEN Corporation’s (NEOG - Free Report) third-quarter fiscal 2021 earnings per share (EPS) of 25 cents increased from the year-ago quarter’s figure of 23 cents per share by 8.7%. It lagged the Zacks Consensus Estimate by 7.4%.
Revenues for fiscal third quarter increased 16.9% on a year-over-year basis to $116.7 million despite the ongoing difficult global business environment. Revenues surpassed the Zacks Consensus Estimate by 9%.
Segments in Detail
For the quarter, the company 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 (on Dec 30) — a food quality diagnostics company — contributed to growth. The segment’s increase was led by a 14% improvement in sales of its diagnostic test kits to detect natural toxins in food and animal feed, including increases in sales of its aflatoxin test kits (up 25%).
Animal Safety revenues in fiscal third quarter were $58.3 million, up 18.1% year over year. The upside can be attributed to 79% increase in sales of rodenticides throughout its product line, including significantly higher sales in the U.S. Pacific Northwest of products.
NEOGEN’s International business increased 16% in the reported quarter, partly owing to two months of sales from the Megazyme acquisition. NEOGEN’s U.K. business increased 4% in pounds as lower economic activity caused by the pandemic resulted in sluggish sales performance across the organization. However, this increase was 9% when converted to U.S. dollars.
NEOGEN’s revenue from China for the current quarter was more than doubled driven by increased sales of disinfectant products, and greater sales of swine and dairy genomic services. NEOGEN Latinoamerica business based on Mexico grew 14% in the reported quarter in local currency.
Neogen Corporation Price, Consensus and EPS Surprise
Neogen Corporation price-consensus-eps-surprise-chart | Neogen Corporation Quote
NEOGEN Australasia’s quarterly revenues rose 73% in local currency, aided in part by the February 2020 acquisition of a food safety distributor. NEOGEN Brazil’s revenues rose 12% in local currency on strength in diagnostic kit sales, but declined 11% after translation of the Brazilian real to U.S. dollar.
In fiscal third quarter, revenues from NEOGEN’s worldwide animal genomics business increased 10% year over year. The upside was primarily led by 19% increase in sales in the global swine industry, as producers rebuilt their herds that were devastated by African swine fever, especially in China.
Margin Details
NEOGEN’s fiscal third-quarter gross profit increased 18.8% year over year to $53.8 million. Gross margin expanded 75 basis points (bps) to 46.1%.
Sales and marketing expenses rose 5.8% to $18.7 million, whereas administrative expenses rose 40.4% from the prior-year quarter to $15.1 million. Research & development expenses were $4.2 million, up 10.8% from the year-ago quarter. Operating costs totaled $38.1 million, up 17.9% year over year.
In the reported quarter, operating income was $15.8 million, up 20.9% from the year-ago quarter’s level. Nevertheless, operating margin expanded 46 bps to 13.5%.
Cash Position
The company ended fiscal third-quarter 2021 with cash and investments of $353.3 million, up from $343.7 million at the end of the fiscal second quarter. The company had no debt on the balance sheet at quarter-end.
Our Take
NEOGEN exited the fiscal third quarter on a mixed note with better-than-expected revenues and earnings lagging the Zacks Consensus Estimate. The company witnessed growth in its segmental performance, primarily boosted by enhanced sales of cleaners and disinfectants to meet the requirements created by the coronavirus pandemic. NEOGEN’s international performance was impressive 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.
However, drop in revenues from Brazil due to foreign exchange translations is disappointing. Rise in operating costs is a concern.
Zacks Rank & Key Picks
NEOGEN currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space that have already announced their quarterly results are Abbott Laboratories (ABT - Free Report) , Hologic, Inc. (HOLX - Free Report) and Hill-Rom Holdings, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Worldwide sales of $10.7 billion in the quarter outpaced the consensus mark by 7.9%.
Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%. Revenues of $1.61 billion were in line with the Zacks Consensus Estimate.
Hill-Rom reported first-quarter fiscal 2021 adjusted EPS of $1.53, beating the Zacks Consensus Estimate by 45.7%. Revenues of $741.1 million surpassed the consensus mark by 13.2%.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%.
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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