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It has been about a month since the last earnings report for Neogen (NEOG). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Neogen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Neogen Misses Q4 Earnings, Tops Revenue Estimates
Neogen’s fourth-quarter fiscal 2021 earnings per share of 15 cents were flat with the year-ago quarter’s figure. It missed the Zacks Consensus Estimate by 6.3%.
Full-year earnings per share of 57 cents per share rose 1.8% from the year-ago 56 cents per share but missed the Zacks Consensus Estimate by 3.4%.
Revenues for the fiscal fourth quarter increased 16.8% on a year-over-year basis to $127.4 million despite the ongoing difficult global business environment. Revenues surpassed the Zacks Consensus Estimate by 2%. Per the company, the fourth quarter was the 116th of the past 122 quarters that Neogen reported revenue increases as compared to the same period in the previous year.
The company reported revenues of $468.5 million in fiscal 2021, up 12% from the year-ago period. The same beat the Zacks Consensus Estimate by 0.5%.
Segments in Detail
For the quarter, the company registered Food Safety revenues of $64.1 million, reflecting 18% (up 12% organically) year-over-year growth. The Megazyme acquisition strongly contributed to the company’s quarterly revenues. Further, growth was boosted by continued strong sales of the recently-launched Soleris Next Generation (NG) rapid microbial testing solution and increase in sales of natural toxin (up 10%) and allergen (up 19%) test kits as businesses began to rebound from the COVID-19 pandemic.
Animal Safety revenues in fiscal fourth quarter were $63.3 million, up 15.6% year over year. The upside can be attributed to strong growth in the veterinary instruments line (up 50%), primarily needles and syringes and the animal care line (up 51%), driven by significant spending on companion animal during the COVID-19 pandemic. Further, a 33% increase in sales of rodent control products and a 26% rise in insect control products, enhanced by revenues from the company's acquisition of the StandGuard product line in July 2020, contributed to the segment’s impressive performance.
Revenues from Neogen’s worldwide genomics business increased 21% in fiscal fourth quarter on a year-over-year basis. The upside was primarily driven by continued strength in companion animal testing services in the United States and Australia and new bovine and porcine business in China.
Neogen’s International business, which primarily reports through the Food Safety segment, increased 11% in fiscal 2021. Neogen’s U.K. business increased 4% in pounds in fiscal 2021 on strong sales of cleaners and disinfectants, partially offset by sluggish sales of diagnostic test kits due to the COVID-19 pandemic.
Neogen’s revenue from China for fiscal 2021 doubled on increased demand for biosecurity products due to African swine fever outbreaks. Neogen’s Latinoamerica business and its Brazilian operations grew 13% and 15%, respectively, in local currency for fiscal 2021.
Neogen’s fiscal fourth-quarter gross profit increased 11.5% year over year to $57.7 million. Yet, gross margin contracted 215 basis points (bps) to 45.3%.
Sales and marketing expenses rose 24.5% to $20.5 million, whereas administrative expenses rose 8.4% from the prior-year quarter to $12.9 million. Research & development expenses were $4.1 million, up 17.9% from the year-ago quarter. Operating costs totaled $37.4 million, up 17.8% year over year.
In the reported quarter, operating income was $20.3 million, up 1.6% from the year-ago quarter’s level. Nevertheless, operating margin contracted 239 bps to 15.9%.
The company exited fiscal fourth quarter with cash and investments of $381.1 million, up from $353.3 million at the end of the fiscal third quarter and $343.7 in the year-ago period. The company had no debt on the balance sheet at year-end.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
Currently, Neogen has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Neogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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