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NEOG Lags on Q2 Earnings, Revs Beat - Analyst Blog

Posted
12/20/2013 2:18:00 PM
By: Zacks.com
Referenced Stocks:BSX;HRC;NEOG;NUVA

Neogen Corp. ( NEOG ) reported second quarter fiscal 2014 earnings per share of 17 cents, lagging the Zacks Consensus Estimate of 25 cents by 47%. The results also registered a fall of 10.5% from the year ago quarter earnings of 19 cents.

Net income declined 7.4% to $6.2 million from $6.7 million reported a year ago.

Revenue in Details

Revenues in the second quarter grew 17.4% to a record of $59.5 million, marginally surpassing the Zacks Consensus Estimate of $59 million.

Segment Details

Neogen operates through two business segments viz -Food Safety and Animal Safety.

Revenues from the Food Safety division, representing 47.6% of total revenues climbed 9% to $28.4 million in the quarter. Growth was mostly organic. Increase in sales of instruments and disposables resulted from Neogen's Soleris test system, used to detect spoilage organisms and the AccuPoint general sanitation test system. However, partially offset by sales of tests to detect natural toxins.

The Animal Safety division's revenues increased 26.3% to $31.6 million in the reported quarter, driven by the newly acquired SyrVet veterinary instruments and Prima Tech. On an organic basis, the segment grew 13%.

Neogen's GeneSeek subsidiary registered a growth of more than 50% in the quarter, led by successful market share gains in the new genomic test market for beef and dairy cattle.

Business at the Animal Safety segment was also driven by double-digit increase in sales of veterinary biologics, including a proprietary equine botulism vaccine, and a significant increase in sales of Neogen's proprietary detectable veterinary needles. Neogen's forensic test kit revenues were up 33% year over year, due to increasing international sales of the product line. A significant 27% increase in sales of the company's line of agricultural cleaners and disinfectants was also noted.

Operational Update

Neogen's gross margin decreased 430 basis points (bps) to 49.5% in the second quarter of fiscal 2014 from 53.8% in the comparable year-ago period.
Sales and marketing along with administrative expenses increased 17.9% to $17.5 million.

Research and development expenses also grew 15.5% to $2.3 million, on account of new product developments and product improvements. With increase in operational expenses, operating margin decreased 430 bps to 16.3% from the year-ago level of 20.6%.

Financial Update

Neogen's cash and cash investments on Nov 30, 2013 was $79 million, lower than $85.4 million as of May 31, 2013. The company had no long-term debt at the end of the quarter.

Zacks Rank

Currently the stock carries a Zacks Rank # 4 (Strong Sell). A better-performing stock  in the Medical Products industry is Hill-Rom Holdings, Inc. ( HRC ), NuVasive, Inc. ( NUVA )  each carrying a Zacks Rank #1 (Strong Buy) and Boston Scientific Corp. ( BSX ) carrying a Zacks Rank #2 (Buy).



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