Why Is Food & Animal Safety Solution Focused Neogen Stock Trading Lower Today?

In an investor presentation at the Wells Fargo 2023 Healthcare Conference, Neogen Corporation NEOG disclosed preliminary Q1 FY24 core revenue growth slightly below expectations.

William Blair's estimate implies revenue about 5% below its and Street expectations (management provided growth ranges, so this is our initial assessment of the potential revenue figure). 

• Animal safety Core revenue is expected to decline by high single-digit and Shift away from smaller production animals, contributing to softer Genomics sales.
• Legacy Food safety: Core revenue is expected to increase in mid-single digits, with soft end-market conditions persisting and continued declines in end-user production volumes. 
• 3M Food Safety: Core revenue flat with transition manufacturing improvements offset by weakness in Asia due primarily to broad weakness in China.

The analysts Brandon Vazquez and Justin Lin expect this will ultimately lead to a miss on EBITDA expectations, but they need additional details from the company. 

William Blair remains bullish on the long-term vision for the company and stock upside. The stock is likely somewhat in the penalty box for the next few quarters until management can show a more definitive track record of execution.

Price Action: NEOG shares are down 12.50% at $19.53 on the last check Thursday.