Neogen (NEOG) Gains From Strong Segmental Sales, Innovation
Neogen NEOG is well positioned to gain from its extensive global foothold and diverse product mix. The stock carries a Zacks Rank #2 (Buy).
Neogen’s Animal Safety segment continues to grow, led by sales of vet instruments and disposables and a new line of business at a large retail customer. Within the biosecurity portfolio, Neogen continues to record solid growth in cleaners, disinfectants and rodenticides.
Food Safety segment revenues increased 151% year over year, including core growth of 3.9%. Sales in the Culture Media & Other category grew in high single digits on a core basis, with strong growth in food quality and nutritional analysis products in its Megazyme business.
Neogen, of late, has been focusing on product launches to strengthen its business on a global scale.
In August 2023, Neogen launched Igenity Enhanced Dairy, a new and progressive genomic data management tool. The same month, Neogen launched an extensive selection of new genetic tests through Paw Print Genetics and Canine HealthCheck solutions. These new tests can identify genetic sequences associated with potential diseases and other traits and can provide invaluable insights into a canine’s genetic composition.
In June 2023, Neogen launched My CatScan 2.0, a significantly upgraded and improved version of the test from a leader in cat genetic screening.
Meanwhile, during the fiscal fourth quarter, the performance of the 3M Food Safety division improved significantly, with core revenue growth of almost 8% on a pro forma basis. The growth was led by Petrifilm, which grew in low double digits and included a reduction in backlog of past due orders.
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The company has made good progress with its transition manufacturing arrangement for Petrifilm and believes it is on track to achieve sustainable higher production levels. Including the former 3M business, core growth for Neogen was in mid-single digits on a proforma basis.
Over the past year, shares of Neogen have outperformed the industry it belongs to. The stock has surged 30.5% compared with the industry’s 1.4% growth during this period.
On the flip side, in the fourth quarter of fiscal 2023, Neogen’s international business was impacted by unfavorable currency movements of 1%. When the magnitude of the pandemic became evident and as it began moving around the world, there was a move toward the safety of the U.S. dollar, negatively impacting local currencies at the company’s international locations, particularly where the outbreaks were less controlled.
Further, the current macroeconomic environment has affected 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.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Haemonetics HAE, Quanterix QTRX and Intuitive Surgical ISRG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics stock has risen 22.8% in the past year. Earnings estimates for Haemonetics have increased from $3.74 to $3.82 for 2023 and remained constant at $4.07 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.39%. In the last reported quarter, it posted an earnings surprise of 38.16%.
Estimates for Quanterix’s 2023 loss per share have remained constant at 97 cents in the past 30 days. Shares of the company have surged 200.6% in the past year compared with the industry’s rise of 0.3%.
QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
Estimates for Intuitive Surgical’s 2023 earnings have remained constant at $5.57 per share in the past 30 days. Shares of the company have increased 53.3% in the past year compared with the industry’s growth of 2.8%.
ISRG’s earnings beat estimates in three of the trailing four quarters and missed in one, the average surprise being 4.19%. In the last reported quarter, Intuitive Surgical delivered an earnings surprise of 7.58%.
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