Episode Details

Neogen Corporation (NEOG) Q4 FY2026 — Neogen's fiscal year ends May 31, so the July 30 print is Q4 AND full-year FY2026 — not a calendar Q2. Q4 revenue $225.3M was FLAT (-0.1%), GAAP EPS $(0.05), FY26 revenue -2.7% with a net loss. The stock went $9.40 -> $12.04: about +28% in two sessions, a 12-month high. Something did improve: core growth hit 4.3%, Food Safety core 5.8% (best since FY23), adjusted gross margin 49.7%, and adjusted EPS of $0.09 beat the ~$0.05 expected. But the FY2027 guide INCLUDES $92M of revenue and $13M of EBITDA from a Genomics division being sold to Zoetis — strip it and the continuing company is SMALLER than FY26 on both lines. THE CALL: REDUCE (4/5, A REAL TURN, PRICED TWICE OVER) — base-case value ~$6.5 vs ~$12.04 today. KEY METRICS: - OUR CALL: REDUCE 4/5 — fair value ~$6.50 vs the $12.04 close (-46%). Street: Hold, ~$11 consensus (4 buy/6 hold/1 sell of 11), range $10-$12 — BELOW the price. Pre-print consensus was ~$7.50, so targets are chasing; William Blair cut to Market Perform the day before the print. - DCF (217.7M shares): continuing adj. EBITDA ~$168M (FY27 guide $181M less $13M Genomics), less ~$12M/yr recurring 'one-time' costs, 24% tax, less ~$30M capex = FCFF ~$100M. At 9% / 2.5% terminal = $5.60. Bear $2.10 · Bull $10.30 · weighted $5.90; we sit at $6.50 for takeout optionality. - REVERSE DCF: at $12.04 enterprise value is $3.2B — requiring ~$190M of FCFF starting NOW vs ~$100M today. Our base case never reaches it this decade. - THE PRINT: Q4 revenue $225.3M (-0.1% reported, CORE +4.3%), adj. gross margin 49.7% (from 46.4%), GAAP $(0.05) vs adjusted $0.09, adj. EBITDA $45.4M (20.2%). FY26: revenue $870.4M (-2.7%, core +1.9%), net loss $(7.9)M, adj. EBITDA $177.8M, adj. EPS $0.32. - SEGMENTS Q4: Food Safety $166.8M, +5.8% CORE — best since FY23; indicator testing & culture media +9.5%, sanitation +9.9%. Animal Safety $58.5M, -8.2% reported but +0.5% core and +7% sequentially as shortages resolved. - THE GUIDANCE TRAP: the FY27 guide INCLUDES $92M revenue and $13M EBITDA from Genomics, sold to Zoetis for ~$140M net (for debt). Continuing company ≈ $790M and ~$168M. Q1 FY27: $207-209M and ~$37M. Implied core growth ~3%. - THE PETRIFILM RISK: the LAST 3M handoff (sample collection) cost $27.4M across FY25-26 and caused two years of Animal Safety shortages. The Petrifilm move to Lansing begins Nov 2026. That line is $332.7M — 38% of revenue. Management sees +200-300bps of gross margin from FY28. - THE ADD-BACKS: ex-SBC, FY26 add-backs were $75.9M = 43% of adjusted EBITDA — transformation $22.3M, sample collection $12.4M, Petrifilm duplicate mfg $12.0M, transaction $10.6M, restructuring $7.0M. Every one also appeared in FY25. - BALANCE SHEET: cash $185.5M, debt $793.7M (all non-current), net debt $608.2M = 3.4x. Repaid $100M; interest $68.5M -> $57.6M. Goodwill $1,047M + intangibles $1,318M = 71% of assets, after $1,059M was impaired in FY25. - CASH FLOW: CFO $83.2M less capex $51.3M = FCF $31.9M — but CFO includes a $38.2M inventory release, so underlying FCF is ~zero. The bull's point: capex went $111.4M -> $104.6M -> $51.3M and just $4.0M in Q4; the Petrifilm plant is built. - R&D & MANAGEMENT: R&D was $18.4M, DOWN from $21.1M — 2.1% of revenue; it rises ~50% in FY27 toward 5% long term. CEO Mike Nassif started Aug 11, 2025, the week of the 12-month low, so the whole +158% is on his watch. Risk factors still cite material weaknesses in internal controls. What to watch: Bullish: the Petrifilm SKU validated on time, the November transition starting cleanly, and the Genomics sale clearing the ACCC/NZCC reviews. Bearish: Q1 FY27 adjusted EBITDA below the ~$37M guided, or any shortage traceable to the Petrifilm move. We'd look again nearer ~$7. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.