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Why Is Neogen (NEOG) Down 2% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Neogen (NEOG). Shares have lost about 2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Neogen due for a breakout? 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 Q4 Revenue Growth on Strong Food Safety Business

Neogen Corporation reported fourth-quarter fiscal 2019 earnings per share (EPS) of 30 cents beat the Zacks Consensus Estimate of 28 cents by 7.1%. However, EPS declined 9.1% from the year-ago quarter.

For fiscal 2019, EPS was $1.15, down 4.9% from a year ago. The figure surpassed the Zacks Consensus Estimate of $1.12 by 2.7%.

Revenues in the quarter increased 1.6% on a year-over-year basis to $109.8 million, missing the Zacks Consensus Estimate of $111 million by 1.1%.

For fiscal 2019, revenues came in at $414.2 million, up 4.1% from the year-ago period. The figure missed the Zacks Consensus Estimate of $415.4 million by 0.3%.

Revenues in Detail

Food Safety Segment: For the quarter under review, revenues at the segment totaled $56.4 million, up 9.1% year over year.

Animal Safety Segment: During the fourth quarter, this segment recorded revenues of $53.3 million, reflecting a 5.7% decline from the year-ago quarter.

Margin Details

Gross margin expanded 110 basis points (bps) to 46% in the fiscal fourth quarter.During the reported quarter, operating income was $18.7 million, declining 6.4% from the year-ago figure of $19.9 million. Operating margin contracted 130 bps to 17.1% in the quarter under review.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Neogen has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Neogen has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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Zacks Investment Research