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Here's Why You Should Retain Neogen (NEOG) Stock for Now
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Neogen Corporation (NEOG - Free Report) is well poised to gain in the coming quarters, led by strong performance across its Animal Safety and Food Safety segments. The strategic partnership deals are an added positive. However, escalating costs and stiff competition are a concern.
In the past six months, the Zacks Rank #3 (Hold) stock has gained 29.7% compared with a 10.5% rise of the industry and a 7% increase of the S&P 500.
The renowned food and animal safety products provider has a market capitalization of $3.70 billion. The company’s earnings for the fiscal third quarter surpassed the Zacks Consensus Estimate by remarkable 200%.
In the past five years, NEOG registered an earnings growth of 6.2% compared with the industry’s 9.6% rise.
Let’s delve deeper.
Factors At Play
Animal Safety Business Grows Well: Animal Safety revenues in the fiscal third quarter were up 1.9% year over year, consisting of 2.2% core growth. The core growth was led by the portfolio of biosecurity products, driven by insect control share gains in the animal protein market.
The company’s genomics business also performed well, with global core growth of 7.7%, led by volume increases in the global beef markets. The upside was partially offset by declines in testing in China caused by the continuation of COVID-related lab closures.
Per management, the acquisitions of GVS and CAPInnoVet are part of Neogen’s strategy to expand companion animal offerings. Added to this, the company’s acquisition of Delf UK Limited is expected to bolster its performance dairy chemicals offerings. Delf’s industrial cleaning products complement Neogen’s Quat-Chem disinfectant and cleaner offerings, enhancing its biosecurity portfolio.
Food Safety Sales Growth Continues: Neogen continues to see rising revenues from the Food Safety business. For third-quarter fiscal 2023, Food Safety revenues surged 141.5% year over year, consisting of 5.8% from core growth and 139.1% from acquisitions.
The core growth was led by the Culture Media & Other category, which benefited from a large order from a vaccine manufacturer. In the Bacterial & General Sanitation product category, a solid increase in the sales of Soleris spoilage detection products contributed to growth.
Strategic Partnerships Deals: Of late, Neogen inked a series of partnership deals, which are expected to drive the company’s segmental growth and international expansion.
In 2022, Neogen completed the merger with 3M to combine the latter’s Food Safety Business with its existing operations. In 2021, Neogen extended its strategic partnership with Gencove, Inc. Through this multi-year global agreement, Neogen can offer its SkimSeek low-pass sequencing technology to customers across the agricultural community.
The company also collaborated with Center for Aquaculture Technologies (CAT) to provide high-quality genotyping services to aquaculture producers in 2021. With respect to the fourth leg of acquisitions and forming strategic alliances, the company is progressing well.
Downsides
Mounting Operating Expenses: In the fiscal third quarter, Negen’s sales and marketing expenses rose 79.7%, whereas administrative expenses rose 85.7% from the prior year’s quarter. Research & development expenses were up 59.1% year over year. Operating costs increased 80.8% from the last year’s quarter.
Image Source: Zacks Investment Research
Competitive Landscape Tough: Neogen faces intense competition from small businesses to divisions of large multinational companies. Some of these organizations have greater financial resources. Historically, NEOG faced intense competition from the development of new technologies by the company’s competitor, which could affect the marketability and profitability of Neogen’s products.
Estimate Trend
In the past 60 days, the Zacks Consensus Estimate for Neogen’s earnings for 2023 has remained constant at 53 cents.
The Zacks Consensus Estimate for 2023 revenues is pegged at $808.3 million, suggesting a 53.3% rise from the 2022 reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Becton, Dickinson and Company (BDX - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
Hologic has gained 1.7% against the industry’s 17.5% growth in the past year.
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth of 7.8%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%.
So far this year, BDX’s shares have dropped 0.2% against the industry’s 8% growth.
Avanos, carrying a Zacks Rank #2, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 13.7% compared with the industry’s 17.5% decline in the past year.
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Here's Why You Should Retain Neogen (NEOG) Stock for Now
Neogen Corporation (NEOG - Free Report) is well poised to gain in the coming quarters, led by strong performance across its Animal Safety and Food Safety segments. The strategic partnership deals are an added positive. However, escalating costs and stiff competition are a concern.
In the past six months, the Zacks Rank #3 (Hold) stock has gained 29.7% compared with a 10.5% rise of the industry and a 7% increase of the S&P 500.
The renowned food and animal safety products provider has a market capitalization of $3.70 billion. The company’s earnings for the fiscal third quarter surpassed the Zacks Consensus Estimate by remarkable 200%.
In the past five years, NEOG registered an earnings growth of 6.2% compared with the industry’s 9.6% rise.
Let’s delve deeper.
Factors At Play
Animal Safety Business Grows Well: Animal Safety revenues in the fiscal third quarter were up 1.9% year over year, consisting of 2.2% core growth. The core growth was led by the portfolio of biosecurity products, driven by insect control share gains in the animal protein market.
The company’s genomics business also performed well, with global core growth of 7.7%, led by volume increases in the global beef markets. The upside was partially offset by declines in testing in China caused by the continuation of COVID-related lab closures.
Per management, the acquisitions of GVS and CAPInnoVet are part of Neogen’s strategy to expand companion animal offerings. Added to this, the company’s acquisition of Delf UK Limited is expected to bolster its performance dairy chemicals offerings. Delf’s industrial cleaning products complement Neogen’s Quat-Chem disinfectant and cleaner offerings, enhancing its biosecurity portfolio.
Food Safety Sales Growth Continues: Neogen continues to see rising revenues from the Food Safety business. For third-quarter fiscal 2023, Food Safety revenues surged 141.5% year over year, consisting of 5.8% from core growth and 139.1% from acquisitions.
The core growth was led by the Culture Media & Other category, which benefited from a large order from a vaccine manufacturer. In the Bacterial & General Sanitation product category, a solid increase in the sales of Soleris spoilage detection products contributed to growth.
Strategic Partnerships Deals: Of late, Neogen inked a series of partnership deals, which are expected to drive the company’s segmental growth and international expansion.
In 2022, Neogen completed the merger with 3M to combine the latter’s Food Safety Business with its existing operations. In 2021, Neogen extended its strategic partnership with Gencove, Inc. Through this multi-year global agreement, Neogen can offer its SkimSeek low-pass sequencing technology to customers across the agricultural community.
The company also collaborated with Center for Aquaculture Technologies (CAT) to provide high-quality genotyping services to aquaculture producers in 2021. With respect to the fourth leg of acquisitions and forming strategic alliances, the company is progressing well.
Downsides
Mounting Operating Expenses: In the fiscal third quarter, Negen’s sales and marketing expenses rose 79.7%, whereas administrative expenses rose 85.7% from the prior year’s quarter. Research & development expenses were up 59.1% year over year. Operating costs increased 80.8% from the last year’s quarter.
Competitive Landscape Tough: Neogen faces intense competition from small businesses to divisions of large multinational companies. Some of these organizations have greater financial resources. Historically, NEOG faced intense competition from the development of new technologies by the company’s competitor, which could affect the marketability and profitability of Neogen’s products.
Estimate Trend
In the past 60 days, the Zacks Consensus Estimate for Neogen’s earnings for 2023 has remained constant at 53 cents.
The Zacks Consensus Estimate for 2023 revenues is pegged at $808.3 million, suggesting a 53.3% rise from the 2022 reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Becton, Dickinson and Company (BDX - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic has gained 1.7% against the industry’s 17.5% growth in the past year.
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth of 7.8%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%.
So far this year, BDX’s shares have dropped 0.2% against the industry’s 8% growth.
Avanos, carrying a Zacks Rank #2, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 13.7% compared with the industry’s 17.5% decline in the past year.