Neogen Corporation NEOG reported adjusted earnings of 33 cents per share in the second quarter of fiscal 2018. The figure beat the Zacks Consensus Estimate by 26.9% and increased 50% from the year-ago quarter.
Revenues increased 12.2% on a year-over-year basis to $101.8 million, lagging the Zacks Consensus Estimate of $101.9 million by a slight margin.
Food Safety Segment: Revenues at the Food Safety segment totaled $49.6 million. Revenues jumped 21.3% in the second quarter on solid overall organic growth. Growth was majorly fueled by strength in a number of existing product lines and recent acquisitions.
During the quarter, the company witnessed a 23% rise in sales of general sanitation products from the year-ago quarter along with growth of 20% in the global culture media business. Moreover, sales of rapid food safety diagnostics to identify food borne pathogens, including equalized salmonella and listeria, rose 14%. Notably, this included a 43% increase in sales test to detect listeria.
We also note that sales at the segment were driven by a 9% rise in sales of allergen tests for food such as gluten and peanuts, courtesy of the global food allergen regulator’s efforts.
Animal Safety Segment: The segment recorded revenues of $52.3 million, reflecting an increase of 5% from the year-ago quarter. Growth at the segment was mainly driven by increased sales of the genomics business, a 14% rise in rodent control product line, 10% rise in sales of animal care products along with a 19% increase in sales of veterinary instruments, particularly in the detectable needles product line.
The genomics business unit recorded a 19% increase on a year-over-year basis. Per management, growth in this business unit was fueled by expansion of the company's testing facilities in Scotland, development of new genomic testing products and the acquisition of Brazil-based Deoxi in early 2016.
Neogen Corporation Price, Consensus and EPS Surprise
Neogen Corporation Price, Consensus and EPS Surprise | Neogen Corporation Quote
Adjusted gross margin expanded 30 basis points (bps) to 48.4% in the quarter, largely due to mixed impact from the acquisitions of Quat-Chem and Rogama.
Adjusted operating income was $18 million or 17.7% of sales in the second quarter, compared with $16.8 million or 21.7% a year ago.
We believe that Neogen is steadily progressing on the back of its four-pronged strategy. Also, we are encouraged by the accretive acquisitions and expanding international footprint which will drive Neogen’s overall results in fiscal 2018. The company has a broad portfolio of innovative disinfectant products and more than 100 EPA and FDA-registered products, which strengthen the company’s global market position. Furthermore, the BetaStar advanced and Raptor integrated analysis platforms are likely to boost Neogen’s Food Safety business in this year.
Zacks Rank & Key Picks
Neogen carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories, Inc. BIO, Integer Holdings Corporation ITGR, and Intuitive Surgical, Inc. ISRG.
Bio-Rad Laboratories flaunts a Zacks Rank #1 (Strong Buy). The company has a long-term expected earnings growth rate of 25% and has gained 34.8% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has a long-term expected earnings growth rate of 9.2%. The stock carries a Zacks Rank #2 (Buy) and has gained 82% over a year.
Integer Holdings has a long-term expected earnings growth rate of 15%. The stock carries a Zacks Rank #2 and has gained 54.7% in a year.
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