Neogen Corporation (NEOG) is facing a challenging environment, with its vast international trade significantly impacted by global macroeconomic issues. These factors, coupled with a highly competitive landscape, are weighing on the company’s stock, which currently carries a Zacks Rank #4 (Sell).
One of the primary challenges Neogen is facing is the volatility in currency exchange rates. The current macroeconomic environment has negatively impacted the company’s financial performance. Additionally, governments and insurance companies are actively seeking ways to control the rising costs of healthcare. This puts pressure on healthcare industry players like Neogen, as they face pressure to keep prices in check.
While Neogen is gradually recovering from the pandemic’s impact, the global inflationary pressure is creating a difficult situation. Rising raw material and labor costs, coupled with increased freight charges and higher interest rates, are putting significant strain on the medical device industry, including Neogen. The company is struggling to maintain control over its cost of revenues and operating expenses. In fiscal 2024, sales and marketing expenses surged by 29.5% year-over-year, and our model predicts a 1.5% increase in this metric for fiscal 2025.
Neogen also faces fierce competition from a wide range of companies, from small businesses to divisions of large multinational corporations. Some of these competitors have significantly greater financial resources than Neogen. Historically, the company has faced intense competition due to the development of new technologies by rivals, which could potentially affect the marketability and profitability of Neogen’s products.
Despite these challenges, Neogen is making progress in strategically choosing high-growth markets and increasing its market share. In the fiscal fourth quarter, the company witnessed double-digit growth in the Petrifilm product line, along with solid growth in culture media and food quality nutritional analysis. The Vet Instruments and Disposables product line also showed strong core growth. In the Animal care and other product category, growth was driven by increased sales of vitamin injectables and Biologics products.
Neogen continues to prioritize research and development. During the fiscal fourth quarter, R&D expenses reached $5.1 million, representing a 4.1% sequential increase. The company is expanding its presence in various geographies, with particularly strong double-digit sales growth in Latin America across most key product categories. Europe and Asia Pacific saw low single-digit and mid-single-digit growth, respectively, driven by strength in Culture media, Petrifilm, General Sanitation, and Sample Handling.
While Neogen faces challenges, investors seeking exposure to the medical space might consider alternative options with stronger prospects. Some better-ranked stocks in the broader medical space include Intuitive Surgical (ISRG), TransMedics Group (TMDX), and Boston Scientific (BSX). Intuitive Surgical and TransMedics boast a Zacks Rank #1 (Strong Buy), while Boston Scientific currently carries a Zacks Rank #2 (Buy).
Intuitive Surgical’s shares have surged 55.4% in the past year. Estimates for the company’s 2024 earnings have remained steady at $6.67 per share over the past 30 days. ISRG has consistently surpassed earnings estimates in each of the last four quarters, delivering an average surprise of 8.97%. In the most recent quarter, the company posted an earnings surprise of 16.34%.
TransMedics’ 2024 earnings per share estimates have increased by 48.1% to $1.20 in the past 30 days. Shares of the company have risen by 174.1% in the past year, outperforming the industry’s 9.2% growth. TMDX has exceeded earnings estimates in each of the last four quarters, with an average surprise of 287.50%. In the most recent quarter, the company delivered an earnings surprise of 66.67%.
Boston Scientific’s 2024 EPS estimates have risen 1.7% to $2.40 in the past 30 days. Over the past year, shares of BSX have climbed 46%, outpacing the industry’s 9.2% growth. In the most recent quarter, BSX delivered an earnings surprise of 6.90%. BSX has consistently exceeded earnings estimates in each of the last four quarters, with an average surprise of 7.18%.
