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Neogen's Q4 Earnings: A Mixed Bag in the Medical Device Sector

Marcus LeeMonday, Feb 24, 2025 5:10 am ET
4min read

Neogen Corporation (NASDAQ: NEOG) recently reported its fourth-quarter earnings, providing insights into the company's performance and the broader medical device sector. The earnings report highlighted both strengths and weaknesses, offering valuable insights for investors. This article will delve into Neogen's Q4 earnings performance, compare it to its historical averages and industry peers, and discuss the key drivers of the company's revenue growth.



Neogen's Q4 earnings performance in 2024 was marked by a net loss of $5.4 million, or $(0.02) per diluted share, compared to net income of $5.6 million, or $0.03 per diluted share, in the prior-year period. Adjusted Net Income was $22.4 million, or $0.10 per diluted share, compared to $30.2 million, or $0.14 per diluted share, in the prior-year period. The decline in earnings was primarily driven by lower Adjusted EBITDA.

Historically, Neogen has experienced fluctuations in earnings. In 2023, the company reported a net loss of $22.9 million, or $(0.12) per diluted share, compared to a net loss of $17.3 million, or $(0.09) per diluted share, in 2022. Adjusted Net Income for 2023 was $105.7 million, or $0.56 per diluted share, compared to $117.3 million, or $0.63 per diluted share, in 2022.

In comparison to its industry peers, Neogen's earnings performance in 2024 was relatively weak. The company's competitors, such as Abbott Laboratories, Medtronic PLC, and Becton, Dickinson and Company, reported higher earnings and revenue growth in their respective Q4 earnings reports.

Several factors contributed to Neogen's Q4 earnings performance in 2024. The company faced soft end-market conditions, particularly in the food production sector, where volumes were still mostly down on a year-over-year basis. Additionally, Neogen incurred costs related to the exit of transition service agreements, including a higher level of inventory adjustments, which negatively impacted gross margin. The company also experienced shipping challenges that constrained order fulfillment rates, although these issues were resolved by the end of the quarter.

Despite these challenges, Neogen made significant progress in integrating the former 3M Food Safety business, which contributed to improved order fulfillment rates and a focus on demand generation. The company expects to leverage the full capabilities of its business in an unconstrained operating environment in fiscal 2025.

NEOG Basic EPS, R&D Expenses...
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Neogen's revenue growth is driven by several key factors:

1. Acquisitions: Neogen's revenue growth is significantly contributed by acquisitions. In fiscal 2024, acquisitions and discontinued product lines contributed 11.9% to the company's full-year revenue growth. This is a substantial factor, as it indicates that strategic mergers and acquisitions play a significant role in Neogen's expansion.
2. Core Revenue Growth: Neogen's core revenue growth, which excludes the impacts of foreign currency translation, acquisitions, and discontinued product lines, was 1.8% in fiscal 2024. This growth is driven by organic expansion within the company's existing business segments.
3. Product Category Growth: Within Neogen's Food Safety segment, the Indicator Testing, Culture Media & Other product category experienced strong growth, particularly in Petrifilm, culture media, and food quality and nutritional analysis products. Additionally, the Bacterial & General Sanitation product category saw growth in pathogen detection and general sanitation products.

Comparing Neogen to other medical device companies in the industry, we can observe the following:

1. Revenue Growth: Neogen's full-year revenue growth of 12.4% in fiscal 2024 is higher than the average revenue growth of its competitors. For instance, the weighted average revenue growth for Neogen's competitors in the Other Medical Equipment, Supplies & Distribution sector was 10.71% in 2022.
2. Acquisitions: Neogen's reliance on acquisitions for revenue growth is higher than some of its competitors. While acquisitions contributed 11.9% to Neogen's revenue growth, the average contribution from acquisitions for Neogen's competitors was not explicitly stated in the provided data. However, it is clear that Neogen's use of acquisitions as a growth strategy is more pronounced than the industry average.
3. Product Category Growth: Neogen's growth in specific product categories, such as Indicator Testing and Bacterial & General Sanitation, is driven by strong demand for these products. This is similar to other medical device companies, which also experience growth in specific product categories based on market demand and trends.

In conclusion, Neogen's Q4 earnings performance in 2024 was marked by a net loss, primarily driven by lower Adjusted EBITDA. The company's earnings performance compared unfavorably to its historical averages and industry peers. However, Neogen's revenue growth is driven by acquisitions, core revenue growth, and growth in specific product categories. Compared to other medical device companies in the industry, Neogen's revenue growth is higher, and its reliance on acquisitions as a growth strategy is more pronounced. The company's focus on organic growth and product category expansion aligns with industry trends, and investors should monitor Neogen's progress in fiscal 2025.
Comments

Post
hey_its_meeee
02/24
$NEOG's dip feels more like a glitch than a red flag. Patience pays in this volatile sector.
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priviledgednews
02/24
NEOGen's Q4 was a bummer, but they got potential.
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joaopedrosp
02/24
Acquisitions are NEOGen's secret sauce for growth.
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vaxop
02/24
Market conditions soft, but progress in integrating 3M is good. Watching for 2025 uptick. 🚀
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investortrade
02/24
Food safety market is a goldmine, NEOG is a play.
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Mylessandstone69
02/24
NEOGen's Q4 was a bummer, but they're strong in food safety. 📈 Maybe a value play after this dip?
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CertifiedWwDuby
02/24
Medical device sector is cutthroat, but rewarding 🤑
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Most_Caramel_8001
02/24
Holding NEOG long-term, expecting a bounce back.
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goldeneye700
02/24
EBITDA hit hard, but acquisitions drive growth. Long-term, they could bounce back. Anyone holding $NEOG?
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scccc-
02/24
@goldeneye700 How long you been holding $NEOG? Any predictions on when they bounce back?
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Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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