Key Takeaways
- Neogen shares jumped 4% after fiscal first-quarter revenue of $222.8 million beat the $208.2 million consensus and the company raised its full-year guidance.
- Neogen says about 3 points of its 8.1% core growth came from distributors cutting inventory in last year’s quarter and the timing of customer orders this quarter.
- Full-year revenue guidance went up $5 million, to $885 million to $890 million, while the quarter beat consensus by about $14.6 million.
- What to watch: Petrifilm production starts moving to Lansing in November, and the $160 million Genomics sale to Zoetis should clear regulatory review by the end of December.
Neogen (NEOG) shares are up 4% today after the food safety company’s fiscal first-quarter results, out after Tuesday’s close, beat Wall Street and came with raised guidance.
Revenue for the three months to Aug. 31 rose 6.5% to $222.8 million, against a $208.2 million consensus.
CEO Mike Nassif said the quarter reflects “encouraging progress as the changes underway across the organization continue to take hold.”
So how good was it, really?
Let’s talk about that 8.1%
Core growth was 8.1%. But Neogen says about 3 points of that came from distributors cutting inventory in last year’s first quarter and the timing of some orders this quarter.
That’s roughly $6 million of revenue (3% of last year’s $209.2 million), and some of it may simply have shifted from later in the year.
That helps explain the guidance. Neogen beat the quarter’s consensus by about $14.6 million, yet raised its revenue outlook for fiscal 2027 (the year to May 2027) by just $5 million, to $885 million to $890 million. Here’s the bigger picture…
Analysts were already at $883 million for the year, so I wouldn’t expect this quarter to move those estimates much.
What’s next is execution
Adjusted EBITDA margin did rise to 18.7% from 17.0%, mostly on higher revenue. Two things decide whether that lasts.
First, Petrifilm. Neogen starts moving production to its Lansing site in November, a shift that runs several quarters. Until it’s done, Neogen pays to make Petrifilm in two places: $4.7 million in duplicate costs this quarter, roughly double last year’s.
Second, debt. The 3M Food Safety deal loaded Neogen with it…
Neogen paid down $20 million this quarter, but with just $4.7 million of free cash flow, most of that came out of cash on hand. Enter the $160 million Genomics sale to Zoetis, due to clear regulatory review by the end of December. Neogen plans to put the proceeds mainly toward debt, enough to cover about a fifth of what it still owes.
So is this real progress?
Yes. Neogen grew in every region, and its operating loss shrank to $1.8 million from $16.1 million. But a $5 million raise suggests management isn’t counting on the rest of the year looking like this quarter.
And of course, every company is operating against the larger uncertainty of the macro backdrop, which will have plenty of quarterly impacts.
But for Neogen specifically, it’s important to keep in mind that the Petrifilm move hasn’t started yet, and the next few quarters will show whether these margins hold through it.
So what is Neogen stock actually worth?
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