It has been about a month since the last earnings report for Neogen (NEOG). Shares have lost about 1.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Neogen's Q4 Earnings Miss Estimates, Margins Crash

Neogen reported fourth-quarter fiscal 2024 earnings per share (EPS) of 10 cents, down 28.6% from the prior year’s comparable period figure. The reported figure also missed the Zacks Consensus Estimate by 16.7%.

The full-year adjusted EPS was 45 cents per share, down 19.6% compared with the year-ago figure. The metric lagged the Zacks Consensus Estimate by 2.2%.

Revenues in the fiscal fourth quarter fell 2.1% on a year-over-year basis to $236.8 million. Core revenues were 2%. Acquisitions and discontinued product lines contributed 0.1%, while foreign currency had a negative impact of 4.2%. However, the metric surpassed the Zacks Consensus Estimate by 5.1%.

The company reported revenues of $924.2 million in fiscal 2024, which rose 12.4% from the year-ago period. The same beat the Zacks Consensus Estimate by 1.3%.

Segments in Detail

Within segments, Neogen registered Food Safety revenues of $166.9 million in the fiscal fourth quarter, marking a 1.4% decrease from the fourth-quarter 2023 figure. Our model projected the segment’s revenues to be $155 million for the fourth quarter.

This consisted of 4.3% core growth, a 0.2% contribution from acquisitions and discontinued product lines and a negative foreign currency impact of 5.9%. The core revenue growth was led by the Indicator Testing, Culture Media & Other product category, which benefited from strong growth in Petrifilm, as well as culture media and food quality and nutritional analysis products.

Revenues from Animal Safety were $69.9 million, down 3.7% year over year. Our model’s projection was $71.2 million.

This consisted of a 3.3% core revenue decline, a 0.3% headwind from discontinued product lines and a negative foreign currency impact of 0.1%. On a global basis, the company’s Genomics business experienced a core revenue decline in the mid-single-digit range.

Margin Details

Neogen’s fiscal fourth-quarter gross profit plunged 7.9% year over year to $113.5 million. The gross margin contracted 302 basis points (bps) to 47.9% due to a 4% increase in the cost of revenues.

Sales and marketing expenses rose 3.5% to $44.4 million, whereas administrative expenses increased 2.3% from the prior-year quarter to $51 million. R&D expenses were $5.1 million, down 27.1% year over year.

Operating costs totaled $100.5 million, up 0.7% from last year’s quarter. The operating margin fell 45 bps in the quarter under review.

Cash Position

Neogen exited the fourth quarter of fiscal 2024 with cash and cash equivalents of $170.6 million compared with $163.2 million at the end of fiscal 2023. The company’s non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.

Full-Year Guidance

Neogen initiated its financial outlook for fiscal 2025.

The company anticipates full-year revenues between $925 million and $955 million. The Zacks Consensus Estimate is currently pegged at $983.2 million.

Capital expenditures are likely to be approximately $85 million, including an approximate $55 million related specifically to the integration of the former 3M Food Safety Division.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -24% due to these changes.

VGM Scores

At this time, Neogen has an average Growth Score of C, though it is lagging a lot 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Neogen has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Neogen is part of the Zacks Medical - Products industry. Over the past month, Boston Scientific (BSX), a stock from the same industry, has gained 7.6%. The company reported its results for the quarter ended June 2024 more than a month ago.

Boston Scientific reported revenues of $4.12 billion in the last reported quarter, representing a year-over-year change of +14.5%. EPS of $0.62 for the same period compares with $0.53 a year ago.

For the current quarter, Boston Scientific is expected to post earnings of $0.58 per share, indicating a change of +16% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Boston Scientific. Also, the stock has a VGM Score of D.

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