Neogen Corporation (NASDAQ:NEOG) reported fourth-quarter fiscal 2024 earnings per share (EPS) of $0.10, down 28.6% from the prior year's comparable period figure. The reported figure also missed the Zacks Consensus Estimate by 16.7%. The full-year adjusted EPS was $0.45 per share, down 19.6% compared with the year-ago figure. The metric lagged the Zacks Consensus Estimate by 2.2%.

Financials

Revenues in the fiscal fourth quarter fell 2.1% on a year-over-year basis to $236.8 million. Core revenues were 2%. Acquisitions and discontinued product lines contributed 0.1%, while foreign currency had a negative impact of 4.2%. However, the metric surpassed the Zacks Consensus Estimate by 5.1%. The company reported revenues of $924.2 million in fiscal 2024, which rose 12.4% from the year-ago period. The same beat the Zacks Consensus Estimate by 1.3%.

Segment Performance

Within segments, Neogen registered Food Safety revenues of $166.9 million in the fiscal fourth quarter, marking a 1.4% decrease from the fourth-quarter 2023 figure. This consisted of 4.3% core growth, a 0.2% contribution from acquisitions and discontinued product lines and a negative foreign currency impact of 5.9%. The core revenue growth was led by the Indicator Testing, Culture Media & Other product category, which benefited from strong growth in Petrifilm, as well as culture media and food quality and nutritional analysis products.

Revenues from Animal Safety were $69.9 million, down 3.7% year over year. This consisted of a 3.3% core revenue decline, a 0.3% headwind from discontinued product lines and a negative foreign currency impact of 0.1%. On a global basis, the company's Genomics business experienced a core revenue decline in the mid-single-digit range.

Profitability

Neogen's fiscal fourth-quarter gross profit plunged 7.9% year over year to $113.5 million. The gross margin contracted 302 basis points (bps) to 47.9% due to a 4% increase in the cost of revenues. Sales and marketing expenses rose 3.5% to $44.4 million, whereas administrative expenses increased 2.3% from the prior-year quarter to $51 million. R&D expenses were $5.1 million, down 27.1% year over year. Operating costs totaled $100.5 million, up 0.7% from last year's quarter. The operating margin fell 45 bps in the quarter under review.

Liquidity

Neogen exited the fourth quarter of fiscal 2024 with cash and cash equivalents of $170.6 million compared with $163.2 million at the end of fiscal 2023. The company's non-current liabilities included a total outstanding debt of $900 million and a committed borrowing headroom of $150 million.

Outlook

Neogen initiated its financial outlook for fiscal 2025. The company anticipates full-year revenues between $925 million and $955 million. The Zacks Consensus Estimate is currently pegged at $983.2 million. Capital expenditures are likely to be approximately $85 million, including an approximate $55 million related specifically to the integration of the former 3M Food Safety Division.

Risks and Challenges

Neogen missed both earnings and revenue forecasts in the fourth quarter of fiscal 2024. The Animal Safety segment posted lower quarterly sales, primarily due to the Genomics business in the United States. In the Food Safety segment, volumes remained mostly down on a year-over-year basis and are likely to see a slow and gradual improvement during fiscal 2025. Additionally, the contraction of both margins in the quarter is discouraging. Foreign currency turned out to be a major headwind this time.

Recent Developments

On a positive note, Neogen successfully completed the relocation of the sample handling product line, expected to ramp up to full production levels by the end of the first quarter of fiscal 2025. In addition, order fulfillment rates improved throughout the quarter and are no longer seen as a constraint for the company. With respect to product technology, Neogen recently witnessed notable developments in two of its priority growth areas — pathogen detection and Petrifilm.

Conclusion

Neogen currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Abbott Laboratories, Inc. ABT and Quest Diagnostics DGX.

Neogen reported annual net income of -$9,421,000, annual revenue of $924,222,000, annual operating cash flow of $35,264,000, and annual free cash flow of $35,264,000 in fiscal 2024. In the fourth quarter, the company reported revenues of $236.8 million, down 2.1% year-over-year. Core revenues were 2%, with acquisitions and discontinued product lines contributing 0.1% and foreign currency having a negative impact of 4.2%. The company's Food Safety segment reported revenues of $166.9 million in the quarter, a 1.4% decrease from the prior-year period. This consisted of 4.3% core growth, a 0.2% contribution from acquisitions and discontinued product lines, and a 5.9% negative foreign currency impact. The Animal Safety segment reported revenues of $69.9 million, down 3.7% year-over-year, with a 3.3% core revenue decline, a 0.3% headwind from discontinued product lines, and a 0.1% negative foreign currency impact.

Neogen's guidance for fiscal 2025 includes full-year revenues between $925 million and $955 million, with core revenue growth in the mid-single-digit range. The company expects capital expenditures of approximately $85 million, including $55 million related to the integration of the former 3M Food Safety Division.

The company's performance was impacted by lower order fulfillment rates, which have now been resolved, and continued softness in end markets, particularly in the Food Safety segment. Neogen has made progress in integrating the 3M Food Safety business, including the relocation of the sample handling product line, and is focused on leveraging its expanded product portfolio and reputation for customer service to drive demand. The company has also seen notable developments in its pathogen detection and Petrifilm product lines, which are priority growth areas.

Overall, Neogen's fiscal 2024 results were mixed, with the company missing earnings and revenue forecasts in the fourth quarter. However, the company has made significant progress in integrating the 3M Food Safety business and is positioned to capitalize on growth opportunities in its core markets and product categories. Investors will be closely watching the company's ability to execute on its strategic initiatives and navigate the current macroeconomic environment in the coming year.