Neogen Corporation, headquartered in Lansing, Michigan, develops, manufactures, and markets various products for food and animal safety. In food safety (70% of post-merger sales), Neogen performs diagnostics to detect unintended substances in food and animal feed, such as pathogens, allergens, and drug residues, for food and feed processing companies. In animal safety (20% of post-merger sales), Neogen sells veterinary instruments, pharmaceuticals, disinfectants, and genomics tests for animals, including cattle, horses, and canines. Sales in the United States account for 60% of total revenue, while international markets, including Canada, Europe, Asia, and Latin America, account for the remaining 40%.
Performance and Challenges
Neogen Corp (NEOG, Financial) reported revenue of $236.8 million for the fourth quarter, surpassing the analyst estimate of $225.84 million. However, the company posted a net loss of $5.4 million, or $(0.02) per diluted share, missing the estimated earnings per share of $(0.01). Adjusted Net Income was $22.4 million, or $0.10 per diluted share, indicating a decline from $30.2 million, or $0.14 per diluted share, in the prior-year period.
John Adent, Neogen’s President and CEO, commented on the results, stating, “After crossing multiple significant integration milestones in the third quarter related to the integration of the former 3M Food Safety business, progress continued on multiple fronts in the fourth quarter. We completed the relocation of the sample handling product line, which we expect to have running at full production by the end of the first quarter. We also saw improvement in our order fulfillment rates throughout the quarter, which have subsequently improved to the point where they are no longer a constraint."
Financial Achievements
Despite the challenges, Neogen Corp (NEOG, Financial) achieved several financial milestones. The company reported full-year revenue of $924.2 million, a 12.4% increase compared to $822.4 million in the prior year. Core revenue growth was 1.8%, with acquisitions and discontinued product lines contributing 11.9%, while foreign currency was a headwind of 1.3%.
Gross margin for the fourth quarter was 47.9%, down from 50.9% in the same quarter a year ago, primarily due to costs incurred related to the exit of the transition service agreements, including a higher level of inventory adjustments. For the full year, gross margin was 50.2%, compared to 49.4% in the prior year.
Segment Performance
In the Food Safety segment, revenues were $166.9 million for the fourth quarter, a decrease of 1.4% compared to $169.3 million in the prior year. Core revenue growth was 4.3%, with acquisitions and discontinued product lines contributing 0.2%, and a negative foreign currency impact of 5.9%. For the full year, revenues for the Food Safety segment were $655.3 million, an increase of 19.9% compared to $546.8 million in the prior year.
The Animal Safety segment reported revenues of $69.9 million for the fourth quarter, a decrease of 3.7% compared to $72.5 million in the prior year. Core revenue declined by 3.3%, with a 0.3% headwind from discontinued product lines and a negative foreign currency impact of 0.1%. For the full year, revenues for the Animal Safety segment were $268.9 million, a decrease of 2.5% compared to $275.7 million in the prior year.
Key Financial Metrics
| Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 |
|---|---|---|---|---|
| Revenue | $236.8M | $241.8M | $924.2M | $822.4M |
| Net Income (Loss) | $(5.4M) | $5.6M | $(9.4M) | $(22.9M) |
| Adjusted Net Income | $22.4M | $30.2M | $97.4M | $105.7M |
| Adjusted EBITDA | $53.0M | $63.1M | $213.2M | $205.4M |
Analysis
Neogen Corp (NEOG, Financial) has demonstrated resilience in the face of integration challenges and market conditions. The company's ability to surpass revenue estimates while managing integration costs and improving order fulfillment rates is noteworthy. However, the decline in net income and adjusted net income highlights the ongoing challenges in achieving profitability. The company's focus on leveraging its broad product portfolio and improving operational efficiencies will be crucial in driving future growth and profitability.
For more detailed insights and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Neogen Corp for further details.
