Food and animal safety product firm Neogen (NEOG 65.64, -2.92) trades about 4.3% lower today, mirroring the weaker broader market, following a mixed Q3 report which saw revenues rise 15.3% compared to last year, albeit in a losing effort.
Before delving into the print, let’s take a brief look at NEOG. For those who may not be familiar, Neogen develops and markets products dedicated to food and animal safety. The Food Safety Division markets dehydrated culture media and diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, plant diseases and sanitation concerns. NEOG’s Animal Safety Division is a leader in the development of animal genomics along with the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals, veterinary instruments, wound care and disinfectants.
Now as for the Q3 results, NEOG reported a bottom line beat on earnings per share (EPS) of $0.27. Top line revenues were about $88.4 million in the quarter as increased sales among the company’s diagnostic test kits due to an outbreak of the mycotoxin DON in corn and wheat crops, and increased demand of allergen test kits due to continued food recalls regarding the detection of unlabeled food allergens aided the results.
Specifically, revenues for the company's Food Safety segment were up 24% compared to the prior year, due to strength in a number of existing product lines, and to a lesser extent, recent acquisitions. The current third quarter Food Safety sales performance was led by a 29% increase in sales of Neogen's rapid tests for natural toxins. Increased testing for the toxins continues to be driven by the 2016 bumper crop of corn in the U.S., Canada and Europe, which necessitated the storage of harvested corn in temporary, non-enclosed conditions conducive to the creation of the molds that create the toxins.
In the Animal Safety segment, revenues increased 8% compared to last year, aided by the May 2016 Preserve acquisition. The company's sales of rapid tests to detect drug residues in forensic samples rose 39% compared to the prior year quarter, due to a significant increase in sales of drug detection kits to commercial labs.
Revenues from Neogen's worldwide animal genomics business increased 20% in the third quarter of fiscal 2017 compared to the prior year. This growth was primarily the result of increased testing capability gained through expansion of the company's testing facilities in Scotland, development of popular new genomic testing products, and the acquisition of Brazil-based Deoxi in April 2016.
On this past Friday, shares of NEOG added about +4.3% for the stock’s biggest one day gains since mid-December, 2016. Perhaps coming back to reality, shares of NEOG trade down today in response to the Q3 print and the strong run-up into the report.