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Neogen (NEOG) Acquires Brazilian Private Company Rogama

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Lansing, MA-based leading global developer of products for food and animal safety, Neogen CorporationNEOG announced that it has acquired Brazil-based Rogama Indústria e Comércio Ltda, which was a private company that developed and manufactured rodenticides and insecticides.

Over the past six months, Neogen has traded below the Zacks categorized Medical Products sub-industry. The stock currently represents a strong return of 24.92% as against the sub-industry's decline of 4.77%. Year to date, the company represented a gain of 17.78%, while the S&P 500 rose 11.00%.

Notably, an expected long-term earnings growth rate of 16.67% indicates the stock's solid potential for further price appreciation in the near future. However, the current year estimate trend for the stock is dismal, with one estimate going down in the past two months and no upward revision. Neogen's current year estimates have inched down to $1.12 over the past two months.

Coming back to the deal, the acquisition strengthens Neogen's biosecurity business which was initiated in 2003 with the acquisition of rodenticides, cleaners and disinfectants from ConAgra.

Rogama provides pest control products to Brazil's agronomic, professional and retail markets. The company is also a major supplier to public health agencies, including a long-term partnership with the Pan American Health Organization. Its annual revenues were approximately $8 million.

Our Take

The acquisition will strengthen Neogen's rodenticide business and fortify its footprint overseas. We believe that expanding its global footprint and focusing on China are the key long-term catalysts for the company. Meanwhile, the global rodenticides market is projected to reach around $1.23 billion by 2022, multiplying at a CAGR of around 3.76% (Markets And Markets).

However, an unfavorable foreign exchange rate will continue to raise concern in the near term. Operating margin is also expected to remain under pressure owing to adverse product mix as well as impact of acquisitions, apart from the foreign exchange woes.

Zacks Rank & Key Picks

Currently, Neogen carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical sector include Addus HomeCare Corporation ADUS , LHC Group, Inc. LHCG and IDEXX Laboratories, Inc. IDXX . Both Addus HomeCare and IDEXX Laboratories sport a Zacks Rank #1 (Strong Buy), while LHC Group carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of 50%.

LHC Group has a long-term expected earnings growth rate of 15%. The company has returned almost 17.6% in the last three months.

IDEXX Laboratories has an expected earnings growth of almost 15%. The company posted a promising year-to-date return of almost 64%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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