NEOG Prelim Q2 Earnings Meet, '25 Sales View Down, Stock Falls

Core Insights - Neogen Corporation (NEOG) reported preliminary second-quarter fiscal 2025 adjusted earnings per share (EPS) of 11 cents, matching the Zacks Consensus Estimate and the previous year's figures [1][2] - The company's stock fell 5.4% to $12.36 following the earnings announcement [2] Revenue Performance - Preliminary revenues for Q2 increased by 0.7% year-over-year to $231.3 million, with core revenues rising by 3.5% [3] - The revenue growth was negatively impacted by acquisitions and discontinued product lines by 0.3% and foreign currency fluctuations by 2.5% [3] Segment Analysis - The Food Safety segment reported revenues of $164.2 million, a slight decrease of 0.1% year-over-year, with core growth of 3.6% [4] - The Animal Safety segment saw revenues of $67.0 million, up 2.8% year-over-year, driven by core growth of 3.2% [5] Margin and Expense Details - Gross profit for Q2 declined by 2.9% year-over-year to $113.3 million, with gross margin contracting by 185 basis points to 49% due to a 4.5% increase in the cost of revenues [6] - Sales and marketing expenses rose by 3.8% to $46.5 million, while administrative expenses increased by 11.7% to $57.8 million [7] Cash Position and Liabilities - Neogen's cash and cash equivalents stood at $140.2 million at the end of Q2, up from $120.5 million at the end of Q1 [8] - The company has total outstanding debt of $900 million and a committed borrowing headroom of $150 million [8] Financial Outlook - Neogen updated its full-year revenue guidance for fiscal 2025 to a range of $905 million to $925 million, down from the previous estimate of $925 million to $955 million [9] - The current Zacks Consensus Estimate for full-year revenues is $935.06 million [9] Operational Challenges - The Food Safety segment faced challenges in sample collection and natural toxins, impacting sales despite efforts to reallocate the 3M sample collection product line [12] - Margin contractions and foreign currency fluctuations were noted as significant headwinds for the company [13]