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Neogen Faces Setback: Q3 Earnings Miss Expectations, Shares Tumble
LANSING, Mich., April 9, 2024 – Neogen Corporation (NASDAQ: NEOG), a global leader in food safety, today announced its financial results for the third quarter ended February 29, 2024, revealing a net loss and adjusting its full-year outlook downwards. The announcement triggered a 13% drop in the company's stock price in after-market trading, reflecting investor concerns over short-term challenges, despite the company's ongoing strategic integration efforts.
Key Financial Highlights:
- Revenue: Reported at $228.8 million, marking a 4.8% increase year-over-year but still facing challenges impacting the full-year outlook.
- Net Loss: The company faced a net loss of $2.0 million, equivalent to $(0.01) per diluted share, contrasting with a net profit in the same period last year.
- Adjusted Net Income: Maintained at $26.4 million or $0.12 per diluted share, virtually unchanged from the previous year.
- Adjusted EBITDA: Reached $52.7 million, with the Adjusted EBITDA Margin slightly decreasing to 23.0%.
Strategic and Operational Challenges:
Neogen's efforts to integrate the former 3M Food Safety business encountered operational inefficiencies, particularly affecting order fulfillment rates. President and CEO John Adent emphasized the company's commitment to overcoming these temporary challenges and fulfilling increasing end-market demand.
Sector Performance:
- Food Safety Segment: Achieved revenues of $157.8 million, driven by growth in the Indicator Testing, Culture Media & Other product category.
- Animal Safety Segment: Posted a 6.5% increase in revenues to $71.1 million, led by strong demand in the biosecurity product portfolio.
Liquidity and Capital Resources:
The company reported $168.4 million in cash and investments, with significant ongoing investments, including $100 million earmarked for the integration of the 3M Food Safety Division.
Updated Fiscal Year 2024 Outlook:
- Revenue: Now projected to be between $910 million and $920 million.
- Adjusted EBITDA: Expected to range from $210 million to $215 million.
- Capital Expenditures: Forecasted to remain at approximately $130 million.
Investor Reaction and Future Expectations:
The after-market 13% share price drop reflects investor concerns over Neogen's near-term financial health. However, the company remains optimistic about overcoming current operational inefficiencies and leveraging positive trends in the food and animal safety markets to achieve long-term growth.
Neogen's strategic focus on integrating and enhancing its product offerings, despite current challenges, illustrates its commitment to solidifying its position as a leader in the global food safety industry. As the company moves forward with its integration efforts and operational improvements, investors and stakeholders are closely watching for signs of sustained progress and long-term benefits from the strategic expansion.
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