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Why Is Neogen (NEOG) Up 9.4% Since Last Earnings Report?

Zacks Equity Research
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It has been about a month since the last earnings report for Neogen (NEOG). Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Neogen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Neogen Sees Q2 Revenue Growth on Strong Food Safety Business

Neogen reported earnings per share (EPS) of 31 cents in the second quarter of fiscal 2019. The bottom line beat the Zacks Consensus Estimate of 30 cents. However, EPS declined 6.1% from the year-ago quarter.

Revenues increased 4.6% on a year-over-year basis to $107.1 million, missing the Zacks Consensus Estimate of $109 million by 1.7%.

Per Neogen, growing revenues from key food safety products, including tests for foodborne pathogens and sanitation, contributed to the top line. The company also witnessed strength in the natural toxin product lines. Also, continued growth in the company’s global animal genomics business boosted the top line.

Revenues in Detail

Food Safety Segment:
Revenues at the segment totaled $53.8 million, up 9.3% on solid overall organic growth. Sales of the foodborne pathogen detection tests, like Listeria and Salmonella, rose 24% year over year in the reported quarter. Revenues also included contribution from Neogen’s Listeria Right Now test system.

The company also witnessed a 20% rise in sales of general microbiology tests, which include tests to detect spoilage and indicator microorganisms (for instance yeasts and molds) in food and other consumer products.

Animal Safety Segment: The segment recorded revenues of $53.3 million, reflecting a 3.5% rise from the year-ago quarter. Strength in the global biosecurity products, including a 22% rise in sales of agricultural insecticides and a 15% increase in Preserve disinfectants sales led the upside.

The worldwide genomics business unit recorded an 8% increase in the reported quarter. Per management, this growth is partly attributable to the September 2017 buyout of the University of Queensland Animal Genetics Laboratory in Australia. Also, the upside is backed by robust revenues from the company’s beef genomics business, both for beef breed associations and commercial producers.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Neogen has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Neogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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