Neogen Corporation NEOG reported preliminary second-quarter fiscal 2025 adjusted earnings per share (EPS) of 11 cents, in line with the Zacks Consensus Estimate. The bottom line was also on par with the year-ago quarter’s registered numbers.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Following the preliminary earnings announcement, NEOG stock fell 5.4% to $12.36 last Friday.

Neogen’s Q2 Revenues

As per the preliminary results, revenues surged 0.7% on a year-over-year basis to $231.3 million. Core revenues increased 3.5%. Acquisitions and discontinued product lines had a negative impact of 0.3% while foreign currency had a negative impact of 2.5%. The metric surpassed the Zacks Consensus Estimate by 2.2%.

Neogen’s Segments in Detail

The company's Food Safety segment registered preliminary revenues of $164.2 million, marking a 0.1% decrease year over year. This consisted of 3.6% core growth, a negative 0.1% contribution from acquisitions and discontinued product lines, and a negative foreign currency impact of 3.6%. The core revenue growth was led by solid performance in biosecurity and bacterial & general sanitation product categories. Our model projected the segment’s revenues to be $161.5 million for the fiscal second quarter.

Preliminary revenues from Animal Safety totaled $67.0 million, up 2.8% year over year. Our model’s projection was $64 million. This consisted of 3.2% core revenue growth, a favorable 0.3% foreign currency impact and a negative 0.7% impact from discontinued product lines. The core growth was led by biosecurity and animal care & other product categories. On a global basis, the company’s Genomics business experienced a core revenue decline in the mid-single-digit range. Our model projected the segment’s revenues to be $65.2 million for the quarter.

Neogen’s Margin Details

Going by the preliminary figures, the fiscal second-quarter gross profit declined 2.9% year over year to $113.3 million. The gross margin contracted 185 basis points (bps) to 49% due to a 4.5% increase in the cost of revenues.

Sales and marketing expenses amounted to $46.5 million, up 3.8% year over year, whereas administrative expenses increased 11.7% from the prior-year quarter’s level to $57.8 million. R&D expenses totaled $5.1 million, down 11.3% year over year. Operating costs amounted to $109.4 million, up 7% from that reported a year ago. The operating margin fell 461 bps in the quarter under review.

Neogen’s Q2 Cash Position

Neogen’s preliminary result recognized cash and cash equivalents of $140.2 million at the end of the fiscal second quarter compared with $120.5 million at the end of the fiscal first quarter. The company’s non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.

Neogen’s Full-Year Guidance

Neogen has also updated its financial outlook for fiscal 2025.

The company now anticipates full-year revenues to be between $905 million and $925 million (down from $925-$955 million). The Zacks Consensus Estimate is currently pegged at $935.06 million.

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Capital expenditures are projected to be $85 million, including almost $55 million related to the integration of the former 3M Food Safety Division. 

Our Take

Neogen’s preliminary fiscal Q2 earnings matched the Zacks Consensus Estimate but revenues beat the same. The Food Safety segment faced headwinds in sample collection and natural toxins. Despite the successful reallocation of the 3M sample collection product line, the company fell short of keeping up with end-user demand, which weighed on the sample collection sales in the quarter. Within Animal Safety, growth was driven particularly by rodent control biologics and wound care products.

Additionally, the contraction of both margins in the quarter was discouraging. Foreign currency fluctuations turned out to be a major headwind. Hence, the company has lowered its revenue guidance for fiscal 2025. 

NEOG’s Zacks Rank and Key Picks

Neogen currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader medical space are Abbott ABT, Cardinal Health CAH and Haemonetics (HAE). 

Abbott, carrying a Zacks Rank #2 (Buy) at present, reported third-quarter 2024 adjusted EPS of $1.21, which topped the Zacks Consensus Estimate by 0.8%. Revenues of $10.64 billion beat the Zacks Consensus Estimate by 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABT’s earnings surpassed estimates in three of the trailing four quarters and met in one, the average surprise being 1.64%.

Cardinal Health, carrying a Zacks Rank #2 at present, posted first-quarter fiscal 2025 adjusted EPS of $1.88, which exceeded the Zacks Consensus Estimate by 9.8%. Revenues of $52.28 billion surpassed the Zacks Consensus Estimate by 2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 11.24%.

Haemonetics, carrying a Zacks Rank #2 at present, reported a second-quarter fiscal 2025 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 2.8%. Revenues of $345.5 million topped the Zacks Consensus Estimate by 0.7%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 2.82%.

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