The second quarter was the 103rd of the past 108 quarters that Neogen reported revenue increases as compared with the previous year — a record spanning 27 years. The current quarter marked the first time Neogen has exceeded $100 million in quarterly revenues.
The company's strong performance came from a combination of organic growth and the continued integration of recent acquisitions.
Looking at the company by segment...
Revenues for the company's Food Safety segment increased 21% during the second quarter compared to the prior year quarter, aided by acquisitions within the past year, which report through Neogen's operations in Scotland and Brazil.
Sales of Neogen's line of general sanitation products increased 23% in the current quarter compared to the prior year quarter. The line includes AccuPoint, a system that allows users to instantly verify that surfaces and equipment have been effectively sanitized. The segment's comparative results also included a 20% increase in sales of culture media products.
Also of note in the Food Safety segment's current second quarter results was an 18% increase in sales of test kits to detect drug residues in milk, and a 14% increase in foodborne pathogen detection tests — including a 43% increase in sales of tests to detect Listeria.
In the current quarter, revenues from international sources increased to 38% of total revenues, compared to 34% in the prior year quarter. Overall, international sales increased 24% over the prior year, aided by acquisitions. Revenues from Neogen do Brasil increased 22% in U.S. dollars in the current quarter, Mexico-based Neogen Latinoamerica's sales increased 36%, Neogen Europe's revenues rose 15% in the quarter, Neogen China's revenues increased 23%, and Neogen India's revenues increased 48%, albeit from a small base.
Neogen's Animal Safety segment reported a revenue increase for the second quarter of 5%, led by growth in its genomics business, a 10% increase in sales of its animal care line of products, a 14% increase in its rodent control product line, and a 19% increase in sales of veterinary instruments, which included a 17% increase in sales of its detectable needles. Revenues from Neogen's worldwide animal genomics business increased 19% in the second quarter of fiscal 2018 compared to the prior year.
Expressed as a percentage of sales, operating income was 17.7% for the second quarter, compared to 18.6% in the same quarter a year ago. Neogen's gross margin was 48.4% of sales in its second quarter of the current year, compared to 48.1% recorded in the same quarter of the prior fiscal year.
The operating margin weakness isn't helping today's stock performance, which has reversed since the open.
NEOG popped as high as $63.03/share this morning, but has since pulled back, falling below $60/share. Shares are now showing a modest loss.