Food Safety And Genomics Will Expand Global Markets

Key Takeaways

• Resilient core businesses, strategic divestitures, and efficiency initiatives are expected to stabilize revenue and expand margins as macro and operational conditions improve.
  
• Automation, manufacturing expansion, and data-driven innovation position Neogen to defend and grow market share amid evolving global food safety and diagnostics demand.
  
• Rising trade barriers, weak demand, integration issues, industry shifts, and strong competition threaten Neogen's margins, revenue growth, and long-term market position.

Catalysts

Engages in the development, manufacture, and marketing of various products and services dedicated to food and animal safety worldwide.

• Core Food Safety revenue growth remains resilient (+7% ex-sample collection) despite macro uncertainty and softening global food production, suggesting ongoing robust long-term demand for testing due to the expanding need for safe, regulated food supply chains and public health vigilance, and indicating potential future revenue acceleration as macro conditions improve.
  
• Integration of 3M Food Safety business and internalization of Petrifilm production are progressing, with plans for operational ramp-up and efficiency gains in fiscal 2026; this is likely to drive future gross margin expansion and earnings growth as duplicate costs fade and synergies materialize.
  
• A renewed focus on the highly differentiated, recurring bovine genomics business and cost-optimizing restructurings-especially divestiture of lower-margin or non-core portfolio pieces-are expected to stabilize and improve both revenue consistency and margin trajectory in coming quarters.
  
• Ongoing automation, manufacturing footprint expansion in the U.S., and supply chain flexibility are expected to mitigate tariff and trade headwinds, allowing Neogen to defend market share and potentially improve net margins as global geopolitics stabilize.
  
• Secular pressures for digital, data-driven diagnostics in food and animal safety, coupled with ongoing R&D and new product launches, position Neogen to capture share in a growing, innovation-driven market-supporting both long-term top-line growth and premium pricing power going forward.

Neogen Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Neogen's revenue will decrease by 3.6% annually over the next 3 years.
• Analysts are not forecasting that Neogen will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Neogen's profit margin will increase from -53.6% to the average US Medical Equipment industry of 13.0% in 3 years.
• If Neogen's profit margin were to converge on the industry average, you could expect earnings to reach $105.6 million (and earnings per share of $0.48) by about July 2028, up from $-485.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.0x on those 2028 earnings, up from -2.2x today. This future PE is lower than the current PE for the US Medical Equipment industry at 31.1x.
• Analysts expect the number of shares outstanding to grow by 0.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.87%, as per the Simply Wall St company report.

Neogen Future Earnings Per Share Growth

Risks

• Heightened global trade uncertainty and the imposition of new tariffs, particularly affecting U.S.-China relations, present a risk of increased costs of goods sold and the potential loss of competitiveness or market share in international markets, which could suppress Neogen's gross margins and top-line revenue.
  
• Persistent macroeconomic uncertainty-including faltering consumer confidence, elevated food inflation, and the potential for a recession-has resulted in softer-than-expected demand from both domestic and international distributors, which may continue to limit revenue growth and earnings.
  
• Ongoing integration and operational execution challenges, especially around the 3M Food Safety acquisition (notably Petrifilm and sample collection product lines), have led to production delays and elevated costs; further integration risks or inefficiencies could pressure net margins and dampen future earnings.
  
• Structural headwinds in the Genomics segment, including a multi-quarter decline and strategic refocusing toward the smaller bovine business, expose Neogen to potential long-term revenue attrition and a less diversified revenue base, negatively impacting consistency and potential for future growth.
  
• Intensifying competitive dynamics-including the risk of customers shifting to local suppliers (especially in China), customers exercising more buying power, and the possibility of commoditization from automation and AI adoption in ag-tech-could erode Neogen's pricing power, compress margins, and reduce market share over time.

Valuation

• The analysts have a consensus price target of $7.5 for Neogen based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $5.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $812.9 million, earnings will come to $105.6 million, and it would be trading on a PE ratio of 20.0x, assuming you use a discount rate of 8.9%.
• Given the current share price of $5.02, the analyst price target of $7.5 is 33.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.