Food and animal safety products company
) share price increased 2.1% to $60.97 on Sep 24, after reporting
promising first-quarter fiscal 2014 results.
Neogen's earnings rose 14.3% year over year to 32 cents per share
from 28 cents in the year-ago quarter. Earnings were in line with
the Zacks Consensus Estimate. Net income increased 16.8% to $7.8
million, a quarterly record for the company.
Revenues grew 17.7% to a record $58.5 million, beating the Zacks
Consensus Estimate of $56 million. Recent accretive acquisitions
and strategic international expansions led to strong revenue
growth in the reported quarter.
NEOG's gross margin decreased 140 basis points (bps) to 51.9% in
the first quarter of fiscal 2014 from 53.3% in the comparable
year-ago period, mainly due to a product mix shift toward lower
margin products and services. Sales and marketing along with
administrative expenses increased 11.4% to $15.7 million.
Research and development (R&D) expenses also grew 8.3% to
$2.1 million. However, operating margin increased 40 bps to 21.2%
from the year-ago level of 20.8%.
Quarter in Details
Neogen reports in two segments - Food Safety and Animal Safety.
Revenues from the Food Safety Division, representing 51.3% of
total revenues, climbed 14.5% to $30.0 million in the quarter.
Growth was led by solid revenue gains of 54% in Neogen's
Scotland-based Neogen Europe subsidiary on the back of higher
sales of test kits for mycotoxins, food allergens and meat
speciation. Strong sales of animal genomic testing services also
contributed to the growth.
Both Neogen do Brazil and Neogen Latino America had strong
quarters, with revenues increasing 54% and 34%, respectively.
Overall, Neogen's revenues from international markets constituted
42.3% of total revenues in the first quarter of fiscal 2014.
Revenues from NEOG's line of test kits for food allergens and
meat speciation continue to grow at a healthy pace on the back of
strong demand in the underlying market, increasing 30% in the
reported quarter. Revenues from natural toxin diagnostics grew
12%, based on higher demand for Neogen's quick Reveal Q+
quantitative tests for mycotoxins, including aflatoxin and
The Animal Safety division revenues increased 21.7% to $28.6
million in the reported quarter, driven by the newly acquired
SyrVet veterinary instruments and supplies business, as well as
the earlier acquisition of Uniprim veterinary antibiotic. On an
organic basis, the segment grew 10%.
Revenues from animal care products, and durable and disposable
veterinary instruments jumped 33% and 35% year over year,
respectively. Neogen's GeneSeek subsidiary soared 28% in the
quarter, led by successful market adoption of a new genomic test
for the beef and dairy cattle markets.
NEOG exited the quarter with cash and cash investments of $84.4
million, lower than $85.4 million as of May 31, 2012. The company
had no long-term debt at the end of the quarter.
We are impressed with NEOG's ability to deliver record revenues
and net income in the first quarter of fiscal 2014. The company
continues to expand its top line and product portfolio through
organic and inorganic means. Its recent acquisitions are in
tandem with its strategy to invest in products that can offer
global competitive advantage.
However, we are cognizant regarding potential
integration-related risks and stiff competition from other
players in the market. The stock has a Zacks Rank #3 (Hold).
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