It has been about a month since the last earnings report for Neogen (NEOG). Shares have lost about 0.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Neogen Q1 Earnings Top Estimates, Gross Margin Up

Neogen first-quarter fiscal 2022 earnings per share of 16 cents exceeded the year-ago quarter figure by a penny. It surpassed the Zacks Consensus Estimate by 6.7%.

Revenues in the fiscal first quarter increased 17.4% on a year-over-year basis to $128.3 million. It surpassed the Zacks Consensus Estimate by 4.8%. Per the company, the first quarter was the 117th of the past 123 quarters that Neogen reported a revenue increase as compared to the same period last year.

Segments in Detail

For the quarter, the company registered Food Safety revenues of $62.7 million, reflecting 15.8% (up 10% organically) year-over-year growth. The upside was driven by strong growth across the company's diagnostics portfolio, which includes increases of 36%, 17%, 15% and 14% in culture media, allergens, pathogens and environmental sanitation, respectively. Notably, growth in environmental sanitation was enhanced by the recently-launched AccuPoint Advanced NG. The Megazyme acquisition also contributed to the quarter’s total revenue. Further, growth in the segment was contributed by continued strong sales of the Soleris product line.

Animal Safety revenues in the fiscal first quarter were $65.6 million, up 18.9% (up 19 organically) year over year. The upside can be attributed to strong growth in the veterinary instruments line (up 52%), which primarily includes needles and syringes; and the animal care line (up 27%), driven by relaunch of the ThyroKare supplement in February 2021 and strength in small animal supplements and antibiotics. Further, a 23% increase in insect control products; a 5% rise in sales of rodent control products; and a 6% improvement in sales of cleaners and disinfectants enhanced by revenues from the company's acquisition of the StandGuard product line in July 2020 resulted in the segment’s impressive performance.

Revenues from Neogen’s worldwide animal genomics business increased 14% in the fiscal first quarter on a year-over-year basis. The upside was primarily driven by continued strength in beef and dairy cattle, swine, and sheep genotyping coupled with revenues from a large non-recurring plant research project.

Revenues from Neogen’s international operations increased 20% in first-quarter fiscal 2022, driven in part by the Megazyme acquisition and currency tailwinds from a stronger British pound and Mexican peso. The company’s U.K. business declined 2% in pounds since strong sales of hand sanitizers, cleaners and disinfectants as reported during the year-ago period did not recur in the current fiscal first quarter.

Neogen’s revenues from China in the first quarter of fiscal 2022 increased 59% driven by new sales of Megazyme products and solid growth in genomics. Neogen Australasia revenues surged 41% in local currency on growth in beef and companion animal genomic services. Meanwhile, Neogen Latinoamerica business and its Brazilian operations were up 4% and down 17%, respectively, in local currency.

Margin Details

Neogen’s fiscal first-quarter gross profit increased 19.3% year over year to $60 million. Gross margin expanded 76 basis points (bps) to 46.8%.

Sales and marketing expenses increased 24.5% to $20.6 million, whereas administrative expenses rose 21.5% from the prior-year quarter to $13.4 million. Research & development expenses were $4.3 million, up 11.5% from the year-ago quarter. Operating costs totaled $38.3 million, up 21.8% year over year.

In the reported quarter, operating income was $21.7 million, up 15.1% from the year-ago quarter’s level. Nevertheless, operating margin contracted 34 bps to 16.9%.

Cash Position

The company exited the fiscal first quarter with cash and investments of $400.9 million, up from $381.1 million at the end of the fiscal fourth quarter. The company had no debt on the balance sheet at quarter-end.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Neogen has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Neogen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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