Neogen Stock Tumbles on Q3 Earnings & Sales Miss, Margins Contract

Neogen Corporation NEOG reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of 10 cents, which missed the Zacks Consensus Estimate by 23.1%. The bottom line fell 16.7% from the year-ago quarter’s figure.

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

Neogen’s Q3 Revenues

Revenues in the quarter decreased 3.4% on a year-over-year basis to $220.9 million. Core revenues increased 0.2%. Acquisitions and discontinued product lines had a negative impact of 0.5% while foreign currency had an adverse effect of 3.1%. The metric lagged the Zacks Consensus Estimate by 0.9%.

After the announcement yesterday, NEOG stock plunged 28.7%, finishing the session at $5.02.

Neogen’s Segments in Detail

The company's Food Safety segment registered revenues of $152.7 million in the third quarter, marking a 3.2% decrease year over year. This consisted of 1.5% core growth, a negative 0.3% contribution from discontinued product lines and a negative foreign currency impact of 4.4%.

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 $152.9 million for the fiscal third quarter.

Neogen Corporation Price, Consensus and EPS Surprise

Neogen Corporation price-consensus-eps-surprise-chart | Neogen Corporation Quote

Revenues from the Animal Safety segment totaled $68.2 million, down 4% year over year. This consisted of a 2.6% core revenue decline, an unfavorable 0.4% foreign currency impact and a negative 1% impact from discontinued product lines. The growth was led by animal care & other, and biosecurity product categories, particularly in small-animal supplements, rodent control and cleaner & disinfectant products. Our model’s projection for the business was $69.5 million.

On a global basis, the company’s Genomics business experienced a core revenue decline in the mid-single-digit range.

Neogen’s Margin Details

In the fiscal third quarter, gross profit declined 5.7% year over year to $110.3 million. The gross margin contracted 118 basis points (bps) to 50% despite a 1.1% drop in the cost of revenues.

Sales and marketing expenses amounted to $44.6 million, down 6.9% year over year, whereas administrative expenses increased 7.1% from the prior-year quarter’s level to $56 million. R&D expenses totaled $4.5 million, down 7.8% year over year. Operating costs amounted to $104.9 million, almost consistent with the figure reported a year ago. The operating margin fell 280 bps in the quarter under review.

Neogen’s Q3 Cash Position

Neogen’s cash and cash equivalents at the end of the fiscal third quarter totaled $127.7 million compared with $140.2 million at the end of the fiscal second quarter. The company’s non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.

Neogen Revises Fiscal 2025 Outlook

The company now anticipates full-year revenues to be approximately $895 million (previously between $905 million and $925 million). The Zacks Consensus Estimate is currently pegged at $908.3 million.

Capital expenditures are projected to be nearly $100 million (earlier, approximately $85 million).

Our Take on NEOG

Neogen ended the fiscal 2025 third quarter with both revenues and earnings missing the respective estimates. Both the metrics also decreased on a year-over-year basis. Performance in the Food Safety segment was adversely impacted by the challenges from the sample collection product line. Meanwhile, Animal Safety saw notable softness in China, with distributors taking a cautious approach due to macroeconomic uncertainty in the region. The contraction of both margins was discouraging as well. Neogen’s revised fiscal 2025 outlook turned out to be dismal, taking into account the lower-than-expected third-quarter results, rising economic headwinds and expected tariff-related impacts in the fourth quarter. 

On a promising note, a solid underlying business contributed to the core Food Safety growth.  The company is making progress in establishing its own Petrifilm production, with the first of two production lines almost completely installed. The initial test production is expected to begin in the fall. 

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 AngioDynamics ANGO, Veeva Systems VEEV and Masimo MASI.

AngioDynamics, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a 13-cent loss. Revenues of $72 million beat the Zacks Consensus Estimate by 2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 composite’s 10.5% growth. The company surpassed earnings estimates in each of the trailing four quarters, with the average surprise being 70.9%.

Veeva Systems, sporting a Zacks Rank #1 at present, posted fourth-quarter fiscal 2025 adjusted EPS of $1.75, exceeding the Zacks Consensus Estimate by 10.1%. Revenues of $720.9 million surpassed the Zacks Consensus Estimate by 3.2%.

VEEV has an estimated long-term earnings growth rate of 26.6% compared with the industry’s 20.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.9%.

Masimo, currently sporting a Zacks Rank #1, reported a fourth-quarter 2024 adjusted EPS of $1.80, which surpassed the Zacks Consensus Estimate by 20.8%. Revenues of $600.7 million topped the Zacks Consensus Estimate by 0.8%.

MASI has an estimated earnings yield of 3.5% for fiscal 2025 against the industry’s 3.6% yield. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 14.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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