Neogen's NEOG vast international trade is being impacted by global macroeconomic issues. Also, a tough competitive landscape weighs on the stock. NEOG stock carries a Zacks Rank #4 (Sell) currently.

Factors Pulling NEOG Stock Down

Neogen’s international business continues to be affected due to currency movements. During the fiscal first quarter, the company faced a foreign currency headwind of 390 basis points. 

Further, the current macroeconomic environment has been affecting Neogen’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might put pressure on players in the healthcare industry, with Neogen being no exception.  Although the company is gradually coming out of the impact of the two-and-a-half-year-long healthcare crisis, deteriorating international trade, with global inflationary pressure leading to a tough situation related to raw material and labor cost as well as freight charges and rising interest rate have put the medical device space in a tight spot.

With sustained macroeconomic pressure, the company may struggle to keep its cost of revenues and operating expenses in check. In the fiscal first quarter of 2025, administrative expenses increased 14.5% from the prior-year quarter’s level to $51.7 million. Also, operating costs rose 5.2% year over year to $102.7 million. Our model forecasts a 0.5% rise in the metric for fiscal 2025.

Further, Neogen faces intense competition from companies ranging from small businesses to divisions of large multinational companies. Some of these organizations have substantially greater financial resources than the company. Historically, Neogen has faced intense competition resulting from the development of new technologies by the company’s competitors, which could affect the marketability and profitability of Neogen’s products.

Neogen Corporation Price

Neogen Corporation price | Neogen Corporation Quote

Over the past three months, shares of NEOG have declined 20.8% compared with the industry’s 2.7% decline. With worldwide geopolitical issues getting complicated day by day, the company may continue to face supply related issues. Further, labor shortages and rising healthcare costs along with inflationary pressure might continue to dent Neogen’s profit margins. Accordingly, the stock might take time to regain its lost momentum.

Factors Working in Favor of NEOG

In fiscal 2024, Neogen made a few significant launches, which include the new Molecular Detection Assay 2 – Salmonella Enteritidis/Salmonella Typhimurium (MDA2SEST) and CelluSmart technology (from Megazyme by Neogen). Additionally, the company launched the Petrifilm Automated Feeder to help labs efficiently process microbial tests and meet food safety standards. In April 2024, the company launched Neogen Farm Fluid MAX (in Great Britain) — a dual-action disinfectant designed for challenging farm conditions.

Neogen is progressing well in terms of picking the right growth markets and gaining a bigger share of those markets. In the fiscal first quarter, the Indicator Testing, Culture Media & Other product category benefited from strong growth in the Petrifilm product line as well as solid growth in culture media and food quality nutritional analysis. Additionally, the Bacterial and General Sanitation product category saw modest growth in Pathogens. Also, the Natural Toxins and Allergens category experienced modest growth in Allergens but experienced a decline in Natural Toxins.

The company is expanding well in other geographies. The company is seeing double-digit sales growth in Latin America, with strong performance across most key product categories. 

Key Picks

A few better-ranked stocks in the broader medical space are Veracyte VCYT, Haemonetics HAE and Phibro Animal Health PAHC.

Veracyte has an estimated 2024 earnings growth rate of 37.2% compared with the industry’s 15.3%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 520.6%. Its shares have risen 44.5% compared with the industry’s 3.6% growth in the past year. VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 15.9% for fiscal 2025 earnings compared with the industry’s 12.3%. Shares of the company have fallen 8.3% against the industry’s 9.7% growth. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 2.82%.

Phibro Animal Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 35.3% for fiscal 2025 compared with the industry’s 11.1%. Shares of the company have risen 77.6% compared with the industry’s 9.8% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.47%.

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