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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 gaining from robust sales growth in the Food Safety business. The company’s international business reported impressive results for first-quarter fiscal 2022. Contributions from the Megazyme acquisition buoy optimism. A strong solvency position bodes well for the company. However, escalating costs and macroeconomic woes raise apprehension.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 10% against 7.5% fall of the industry and 27.6% rise of the S&P 500.
The renowned food and animal safety products provider has a market capitalization of $4.77 billion. Its last-reported first-quarter fiscal 2022 earnings surpassed the Zacks Consensus Estimate by 6.7%.
Over the past five years, the company registered earnings growth of 8.6%, ahead of the industry’s 7.0% rise and the S&P 500’s 2.8% increase. The company projects 12.1% growth for the next year, compared with the industry’s growth projection of 19.5% and the S&P 500’s projected 9.5% growth.
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Let’s delve deeper.
Factors At Play
Food Safety Sales Growth Continues: We are upbeat about NEOGEN’s Food Safety business, which registered 15.8% year-over-year revenue growth in first-quarter fiscal 2022. The upside was driven by strong growth across the company's diagnostics portfolio. The newly-launched AccuPoint Advanced NG continued to gain market share during the quarter. The Megazyme acquisition also contributed to total revenues. Further, the company witnessed robust sales growth in the NEOGEN Analytics Food Safety risk management software in the reported quarter and expects to maintain this growth trend through fiscal 2022.
International Business Holds Solid Ground: NEOGEN’s international operations registered 20% growth in sales during the fiscal first quarter driven in part by the Megazyme acquisition and currency tailwinds from a stronger British pound and Mexican peso. Revenues from the worldwide animal genomics business increased 14% in the reported quarter on a year-over-year basis. The upside was primarily driven by continued strength in beef and dairy cattle, swine, and sheep genotyping coupled with revenues from a large non-recurring plant research project. Meanwhile, the company’s revenues from China climbed 59% in the quarter, whereas NEOGEN Australasia revenues surged 41% in local currency.
Strong Solvency: NEOGEN exited the fiscal first quarter with cash and investments of $400.9 million. However, it is worth noting that the company does not have any debt on its balance sheet, which indicates a strong solvency position.
Downsides
Escalating Costs: In the fiscal first quarter, NEOGEN’s sales and marketing expenses increased 24.5%, while administrative expenses rose 21.5% and research & development expenses climbed 11.5%. These mounting expenses drove operating costs by 21.8% year over year, which is building significant pressure on the company’s bottom line.
Coronavirus Concern: NEOGEN continues to be adversely impacted due to the pandemic-led global market disruptions, especially in the food industry. Per management, in the fiscal first quarter, operating income continued to be impacted by higher costs in several areas, particularly freight, due to the effects of the COVID-19 pandemic.
Macroeconomic Woes: The current macroeconomic environment across the globe has adversely affected NEOGEN’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with NEOGEN being no exception. Moreover, fluctuating currency rates hamper the company’s growth, given that it derives a substantial amount of its revenues from international markets.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for NEOGEN’s earnings has moved 2.9% down to 66 cents.
The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $129.06 million, suggesting a 12.2% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Varex Imaging Corporation (VREX - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) .
AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 66.2% versus the 58.9% industry decline.
Varex, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 63.7% versus the industry’s 7.5% fall.
Thermo Fisher, sporting a Zacks Rank #2, has a long-term earnings growth rate of 14%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 9%.
Thermo Fisher has outperformed its industry over the past year. TMO has rallied 41.7% versus the industry’s 6.2% rise.
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Here's Why You Should Hold on to NEOGEN (NEOG) Stock for Now
NEOGEN Corporation (NEOG - Free Report) is gaining from robust sales growth in the Food Safety business. The company’s international business reported impressive results for first-quarter fiscal 2022. Contributions from the Megazyme acquisition buoy optimism. A strong solvency position bodes well for the company. However, escalating costs and macroeconomic woes raise apprehension.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 10% against 7.5% fall of the industry and 27.6% rise of the S&P 500.
The renowned food and animal safety products provider has a market capitalization of $4.77 billion. Its last-reported first-quarter fiscal 2022 earnings surpassed the Zacks Consensus Estimate by 6.7%.
Over the past five years, the company registered earnings growth of 8.6%, ahead of the industry’s 7.0% rise and the S&P 500’s 2.8% increase. The company projects 12.1% growth for the next year, compared with the industry’s growth projection of 19.5% and the S&P 500’s projected 9.5% growth.
Let’s delve deeper.
Factors At Play
Food Safety Sales Growth Continues: We are upbeat about NEOGEN’s Food Safety business, which registered 15.8% year-over-year revenue growth in first-quarter fiscal 2022. The upside was driven by strong growth across the company's diagnostics portfolio. The newly-launched AccuPoint Advanced NG continued to gain market share during the quarter. The Megazyme acquisition also contributed to total revenues. Further, the company witnessed robust sales growth in the NEOGEN Analytics Food Safety risk management software in the reported quarter and expects to maintain this growth trend through fiscal 2022.
International Business Holds Solid Ground: NEOGEN’s international operations registered 20% growth in sales during the fiscal first quarter driven in part by the Megazyme acquisition and currency tailwinds from a stronger British pound and Mexican peso. Revenues from the worldwide animal genomics business increased 14% in the reported quarter on a year-over-year basis. The upside was primarily driven by continued strength in beef and dairy cattle, swine, and sheep genotyping coupled with revenues from a large non-recurring plant research project. Meanwhile, the company’s revenues from China climbed 59% in the quarter, whereas NEOGEN Australasia revenues surged 41% in local currency.
Strong Solvency: NEOGEN exited the fiscal first quarter with cash and investments of $400.9 million. However, it is worth noting that the company does not have any debt on its balance sheet, which indicates a strong solvency position.
Downsides
Escalating Costs: In the fiscal first quarter, NEOGEN’s sales and marketing expenses increased 24.5%, while administrative expenses rose 21.5% and research & development expenses climbed 11.5%. These mounting expenses drove operating costs by 21.8% year over year, which is building significant pressure on the company’s bottom line.
Coronavirus Concern: NEOGEN continues to be adversely impacted due to the pandemic-led global market disruptions, especially in the food industry. Per management, in the fiscal first quarter, operating income continued to be impacted by higher costs in several areas, particularly freight, due to the effects of the COVID-19 pandemic.
Macroeconomic Woes: The current macroeconomic environment across the globe has adversely affected NEOGEN’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with NEOGEN being no exception. Moreover, fluctuating currency rates hamper the company’s growth, given that it derives a substantial amount of its revenues from international markets.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for NEOGEN’s earnings has moved 2.9% down to 66 cents.
The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $129.06 million, suggesting a 12.2% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Varex Imaging Corporation (VREX - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) .
AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 66.2% versus the 58.9% industry decline.
Varex, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 63.7% versus the industry’s 7.5% fall.
Thermo Fisher, sporting a Zacks Rank #2, has a long-term earnings growth rate of 14%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 9%.
Thermo Fisher has outperformed its industry over the past year. TMO has rallied 41.7% versus the industry’s 6.2% rise.