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Here's Why Staying Invested in Neogen (NEOG) Could be Beneficial
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Neogen Corporation (NEOG - Free Report) effectively progresses with its strategic growth pillars, placing the company well for future success. The Animal Safety segment thrives from the successful consumables product line and also boasts a promising future in genomic services. Additionally, the company’s slew of impressive product introductions nicely sets up for growth in the upcoming quarters.
Meanwhile, the adverse macroeconomic pressure on operations and competitive disadvantages remain our concerns for Neogen’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has declined 28.3% compared with a 2.4% fall of the industry and a 26.6% increase in the S&P 500.
The renowned food and animal safety product provider has a market capitalization of $3.29 billion. The company has an earnings yield of 3.7% compared with the industry’s 1% yield. However, in the trailing four quarters, NEOG delivered an average negative earnings surprise of 5.6%.
Let’s delve deeper.
Factors at Play
Progress in Long-Term Growth Strategy: Neogen focuses on boosting the sales of existing products, launching new products, expanding overseas and forming strategic alliances. The company is progressing well in terms of picking the right growth markets and gaining a bigger share of those markets. Their R&D activities have been strong, having expensed $4.9 million in the fiscal third quarter.
Internationally, Neogen is witnessing improvements in sales across Europe, Latin America, Japan and China, banking on strong growth in Petrifilm, pathogens, sample handling and genomics. The company has advanced its food safety data analytics strategy by acquiring Corvium, the SaaS provider behind its software analytics platform.
Image Source: Zacks Investment Research
The integration of the 3M Food Safety Division is on track, with the company completing the relocation of the former 3M pathogen detection product line and starting production in one of the Lansing facilities. Also, the final relocation of the sample handling production is expected to be completed by the end of the fiscal year, with production likely to begin in the fiscal 2025 first quarter.
Bright Prospects of Animal Safety: Neogen’s Animal Safety segment is gaining from the strong performances of a complete line of consumable products marketed to veterinarians and animal health product distributors. Further, its genomic identification and related interpretive bioinformatics services, too, are showing strong prospects.
The business continues to grow, led by sales of vet instruments and disposables and a new line of business with a large retail customer. Within the biosecurity portfolio, Neogen continues to grow solidly in cleaners, disinfectants and rodenticides. In the fiscal third quarter, revenues in the Animal Safety segment were $71.1 million, up 6.5% year over year. Following a period of a choppy scenario in terms of inventory level destocking, Animal Safety has started to witness a favorable trend.
Product Launches: The launch of the Molecular Detection Assay 2 – Salmonella Enteritidis/Salmonella Typhimurium (MDA2SEST) kit is highly relevant for the poultry industry, expanding Neogen’s pathogen detection assay offering. The company also launched Farm Fluid MAX in Great Britain, which is a dual-action disinfectant designed for challenging farm conditions. The new Veratox VIP assay for the detection of walnuts marks the third assay in Neogen’s Veratox VIP line of enhanced quantitative ELISA products.
In January 2024, the company furthered its innovations with SureKill Gel Bait Pro Applicator, which allows users to easily target inconvenient and challenging areas while minimizing bait waste and innovating baiting protocols. Last year, Neogen launched Igenity Enhanced Dairy, a new and progressive genomic data management tool and debuted new genetic tests through Paw Print Genetics and Canine HealthCheck solutions.
Downsides
Global Economic Problems Dent Growth: The company’s international business continues to be affected by currency movements. Governments and insurance companies are looking for ways to curb the rising cost of healthcare, potentially affecting healthcare industry players like Neogen. Furthermore, macroeconomic pressures such as deteriorating international trade, rising inflation, increased raw material, labor and freight costs, as well as higher interest rates, are posing challenges for the company in managing its cost of revenues and operating expenses.
Competitive Landscape Tough: Neogen faces intense competition from both small businesses to large multinational organizations with substantially greater financial resources. Historically, the development of new technologies by competitors has affected the marketability and profitability of the company’s products.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Neogen’s earnings for fiscal 2024 has remained constant at 46 cents.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $912.7 million, which suggests a 10.9% rise from the fiscal 2023 reported number.
Hims & Hers Health’s earnings are expected to surge 281.8% in 2024 compared with the industry’s 15.7%. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 136.9% against the industry’s 25.2% decline in the past year.
Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.1%. Shares of MEDP have rallied 72.3% compared with the industry’s 5.7% growth over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.
ResMed, also carrying a Zacks Rank #2 at present, has an estimated fiscal 2024 earnings growth rate of 19.6% compared with the industry’s 12.9%. Shares of RMD have dropped 11.9% compared with the industry’s 2.5% decline over the past year.
RMD’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 2.8%. In the last reported quarter, it delivered an earnings surprise of 10.9%.
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Here's Why Staying Invested in Neogen (NEOG) Could be Beneficial
Neogen Corporation (NEOG - Free Report) effectively progresses with its strategic growth pillars, placing the company well for future success. The Animal Safety segment thrives from the successful consumables product line and also boasts a promising future in genomic services. Additionally, the company’s slew of impressive product introductions nicely sets up for growth in the upcoming quarters.
Meanwhile, the adverse macroeconomic pressure on operations and competitive disadvantages remain our concerns for Neogen’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has declined 28.3% compared with a 2.4% fall of the industry and a 26.6% increase in the S&P 500.
The renowned food and animal safety product provider has a market capitalization of $3.29 billion. The company has an earnings yield of 3.7% compared with the industry’s 1% yield. However, in the trailing four quarters, NEOG delivered an average negative earnings surprise of 5.6%.
Let’s delve deeper.
Factors at Play
Progress in Long-Term Growth Strategy: Neogen focuses on boosting the sales of existing products, launching new products, expanding overseas and forming strategic alliances. The company is progressing well in terms of picking the right growth markets and gaining a bigger share of those markets. Their R&D activities have been strong, having expensed $4.9 million in the fiscal third quarter.
Internationally, Neogen is witnessing improvements in sales across Europe, Latin America, Japan and China, banking on strong growth in Petrifilm, pathogens, sample handling and genomics. The company has advanced its food safety data analytics strategy by acquiring Corvium, the SaaS provider behind its software analytics platform.
Image Source: Zacks Investment Research
The integration of the 3M Food Safety Division is on track, with the company completing the relocation of the former 3M pathogen detection product line and starting production in one of the Lansing facilities. Also, the final relocation of the sample handling production is expected to be completed by the end of the fiscal year, with production likely to begin in the fiscal 2025 first quarter.
Bright Prospects of Animal Safety: Neogen’s Animal Safety segment is gaining from the strong performances of a complete line of consumable products marketed to veterinarians and animal health product distributors. Further, its genomic identification and related interpretive bioinformatics services, too, are showing strong prospects.
The business continues to grow, led by sales of vet instruments and disposables and a new line of business with a large retail customer. Within the biosecurity portfolio, Neogen continues to grow solidly in cleaners, disinfectants and rodenticides. In the fiscal third quarter, revenues in the Animal Safety segment were $71.1 million, up 6.5% year over year. Following a period of a choppy scenario in terms of inventory level destocking, Animal Safety has started to witness a favorable trend.
Product Launches: The launch of the Molecular Detection Assay 2 – Salmonella Enteritidis/Salmonella Typhimurium (MDA2SEST) kit is highly relevant for the poultry industry, expanding Neogen’s pathogen detection assay offering. The company also launched Farm Fluid MAX in Great Britain, which is a dual-action disinfectant designed for challenging farm conditions. The new Veratox VIP assay for the detection of walnuts marks the third assay in Neogen’s Veratox VIP line of enhanced quantitative ELISA products.
In January 2024, the company furthered its innovations with SureKill Gel Bait Pro Applicator, which allows users to easily target inconvenient and challenging areas while minimizing bait waste and innovating baiting protocols. Last year, Neogen launched Igenity Enhanced Dairy, a new and progressive genomic data management tool and debuted new genetic tests through Paw Print Genetics and Canine HealthCheck solutions.
Downsides
Global Economic Problems Dent Growth: The company’s international business continues to be affected by currency movements. Governments and insurance companies are looking for ways to curb the rising cost of healthcare, potentially affecting healthcare industry players like Neogen. Furthermore, macroeconomic pressures such as deteriorating international trade, rising inflation, increased raw material, labor and freight costs, as well as higher interest rates, are posing challenges for the company in managing its cost of revenues and operating expenses.
Competitive Landscape Tough: Neogen faces intense competition from both small businesses to large multinational organizations with substantially greater financial resources. Historically, the development of new technologies by competitors has affected the marketability and profitability of the company’s products.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Neogen’s earnings for fiscal 2024 has remained constant at 46 cents.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $912.7 million, which suggests a 10.9% rise from the fiscal 2023 reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health (HIMS - Free Report) , Medpace (MEDP - Free Report) and ResMed (RMD - Free Report) .
Hims & Hers Health’s earnings are expected to surge 281.8% in 2024 compared with the industry’s 15.7%. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 136.9% against the industry’s 25.2% decline in the past year.
HIMS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.1%. Shares of MEDP have rallied 72.3% compared with the industry’s 5.7% growth over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.
ResMed, also carrying a Zacks Rank #2 at present, has an estimated fiscal 2024 earnings growth rate of 19.6% compared with the industry’s 12.9%. Shares of RMD have dropped 11.9% compared with the industry’s 2.5% decline over the past year.
RMD’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 2.8%. In the last reported quarter, it delivered an earnings surprise of 10.9%.