Neogen's NEOG vast international trade is being impacted by global macroeconomic issues. A tough competitive landscape also weighs on the stock. NEOG stock currently carries a Zacks Rank #4 (Sell).

Factors Pulling NEOG Stock Down

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 puts 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 high interest rate, have put the medical device space in a tight spot.

Given sustained macroeconomic pressure, the company may struggle to keep its cost of revenues and operating expenses in check. In the fiscal first quarter of 2025, administrative expenses increased 14.5% from the prior-year quarter’s level to $51.7 million. Also, operating costs rose 5.2% year over year to $102.7 million. Our model forecasts a 0.5% rise in the metric for fiscal 2025.

Neogen’s international business continues to be affected due to currency movements. During the fiscal first quarter, the company faced a foreign currency headwind of 390 basis points.

Further, Neogen faces intense competition from companies ranging from small businesses to divisions of large multinational companies. Some of these organizations have substantially greater financial resources than the company. Also, it faces intense competition resulting from the development of new technologies by the company’s competitors, which could affect the marketability and profitability of Neogen’s products.

Neogen Corporation Price

Neogen Corporation price | Neogen Corporation Quote

Over the past three months, shares of NEOG have declined 9.6% against the industry’s 6.8% growth. With worldwide geopolitical issues getting complicated day by day, the company may continue to face supply-related issues. Further, labor shortages and rising healthcare costs along with inflationary pressure might continue to dent Neogen’s profit margins. Accordingly, the stock might take time to regain its lost momentum.

Favorable Aspects for NEOG

On a positive note, Neogen is progressing well in terms of picking the right growth markets and gaining a bigger share of those markets. In the fiscal first quarter, the Indicator Testing, Culture Media & Other product category benefited from strong growth in the Petrifilm product line as well as solid growth in culture media and food quality nutritional analysis. Additionally, the Bacterial and General Sanitation product category saw modest growth in Pathogens. Also, the Natural Toxins and Allergens category experienced modest growth in Allergens but experienced a decline in Natural Toxins.