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Neogen (NEOG) Q4 Earnings Beat Estimates, Margins Expand

Zacks Equity Research
·4 mins read

Neogen Corporation’s NEOG fourth-quarter fiscal 2020 earnings per share (EPS) of 31 cents exceeded the year-ago figure as well as the Zacks Consensus Estimate by a penny. For the full year, the company reported EPS of $1.13, down 1.7% from the year-ago figure. However, it exceeded the Zacks Consensus Estimate by 1.8%.

Revenues in the fiscal fourth quarter declined 0.6% on a year-over-year basis to $109.1 million. Revenues missed the Zacks Consensus Estimate by 1.69%. Fiscal 2020 revenues were $418.2 million, up 1% from the year-ago period. However, it lagged the Zacks Consensus Estimate by 0.4%.

Segments in Detail

In the quarter, the company registered Food Safety revenues of $54.3 million, a 3.7% drop year over year due to a stronger dollar, slowdown in global restaurant and food service industries and disruption in global food supply.

Animal Safety revenues in the fourth quarter were $54.8 million, a 3% increase year over year backed by strong sales of cleaners, disinfectants and sanitizers used in the fight against COVID-19.

Margin Details

Gross margin expanded 139 basis points (bps) to 47.4% in the fiscal fourth quarter. The improvement was driven by sales of sanitizers and disinfectants in response to COVID-19 and continued strength in genomic service revenues, in particular to the companion animal market.

Sales and marketing expenses fell 7.4% to $16.5 million, whereas administrative expenses rose 13.4% to $11.9 million. Research & development expenses were $3.5 million, down 3.1%. Operating costs totaled $31.8 million, a reduction of 0.4% year over year.

During the reported quarter, operating income was $19.9 million, which improved 6.4% from the year-ago quarter. Operating margin expanded 122 bps to 18.2%.

Cash Position

The company ended the fiscal with cash and investments of $343.7 million, an improvement from $267.5 million in fiscal 2019. The company has no debt on its balance sheet.

Our Take

Neogen exited the fiscal fourth quarter on a mixed note with earnings beating the Zacks Consensus Estimate but revenues missing the mark.

Per Neogen, its fourth-quarter results were significantly impacted by currency movements in international operations.While revenues for the quarter were marginally flat, the company was still encouraged by the fact that despite the pandemic-led shutdowns and operational difficulties in many of the markets and with many of its customers, segmental performance was overall stable.

The disruption of the global food supply as a result of the pandemic was concerning. According to Neogen, specialized food production companies struggled to adapt to the abrupt change in consumer needs.

Nonetheless, expansion in both margins was encouraging.

Zacks Rank & Key Picks

Neogen currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are ViewRay, Inc. VRAY, Opko Health OPK and ResMed Inc. RMD. All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for ViewRay’s second-quarter 2020 bottom line is pegged at a loss of 16 cents per share, indicating 50% narrower loss from the year-ago reported quarter figure.

The Zacks Consensus Estimate for Opko Health’s second-quarter 2020 bottom line stands at a loss of 7 cents per share, suggesting 30% improvement from the year-ago period. The same for revenues is pegged at $234.6 million, suggesting a 3.6% increase from the year-earlier reported figure. 

The Zacks Consensus Estimate for ResMed’s fourth-quarter fiscal 2020 revenues is $710.9 million, implying a 0.9% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at 99 cents, indicating 4.2% rise from the year-ago reported figure.

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