Life sciences company Neogen (NASDAQ: NEOG) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 3.6% year on year to $209.2 million. The company’s full-year revenue guidance of $830 million at the midpoint came in 1.3% above analysts’ estimates. Its non-GAAP profit of $0.04 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Neogen’s third quarter results were met with a strong positive market reaction, despite reporting a year-over-year sales decline. Management attributed the quarter’s performance to ongoing operational challenges, including inefficiencies in sample collection and excess inventory, which impacted margins. CEO Mikhael Nassif pointed to improvements in core food safety products and stabilization efforts in the Animal Safety segment, while also acknowledging temporary distributor-related disruptions in Petrifilm. The company’s actions to streamline costs, such as a global workforce reduction and portfolio optimization, were central to mitigating near-term pressures.

Looking ahead, Neogen’s guidance is underpinned by a renewed focus on growth in high-margin product lines, operational efficiency, and targeted reinvestment in commercial and R&D capabilities. Management emphasized its intention to accelerate U.S. market growth and reinvigorate the innovation pipeline, particularly in core food safety and animal health categories. CEO Mikhael Nassif highlighted the planned completion of Petrifilm production integration and ongoing portfolio assessment as foundational to delivering more consistent execution. The company expects these initiatives to support margin improvement and enhanced cash flow as the year progresses.

Key Insights from Management’s Remarks

Management cited cost reductions, portfolio refinements, and targeted innovation as key themes shaping quarterly performance and the ongoing turnaround strategy.

• Workforce and cost reduction: Neogen implemented a global workforce reduction of approximately 10%, aiming to reduce annualized operating expenses by $20 million. Management expects these actions to improve agility and align costs with the current revenue environment, with most savings benefiting the second half of the year.

• Focus on operational efficiency: The company is prioritizing process improvements in sample collection and inventory management, as inefficiencies in these areas led to elevated write-offs and lower gross margins. Enhanced sales and operations planning (S&OP) is expected to release excess inventory and improve free cash flow.

• Portfolio optimization and divestitures: Neogen completed the sale of its cleaners and disinfectants business and is progressing with the potential sale of the genomics segment. Management stated that these moves reflect a deliberate refocus on core, higher-margin categories in food and animal safety.

• Innovation pipeline reinvigoration: The company is investing in R&D to prioritize high-impact projects in food safety and animal health, with CEO Nassif stressing the need for a more externally informed and market-driven innovation strategy. Management noted that the integration of the 3M portfolio has laid a solid foundation, but renewed strategic focus is needed to drive substantial market-shaping innovation.

• Petrifilm production transition: Early product testing in the Petrifilm line has begun, with management confident in meeting the planned production shift timeline. This transition is intended to reduce duplicative costs and support future growth in the key food safety product category.

Drivers of Future Performance

Neogen’s outlook is driven by execution on operational efficiencies, targeted growth in core product lines, and ongoing portfolio refinement.

• Margin recovery initiatives: Management is focused on margin improvement through cost discipline, process enhancements in sample collection, and the full realization of recent workforce reductions. CFO Dave Naemura indicated that the benefits from cost actions and improved manufacturing performance should contribute to sequential EBITDA margin expansion over the year.

• Commercial and geographic expansion: The company plans to empower commercial teams and selectively add commercial headcount in underpenetrated markets, particularly targeting growth opportunities in the United States and Europe. The addition of a Chief Commercial Officer is expected to provide greater leadership and execution in these areas.

• Portfolio and innovation strategy: Continued divestiture of non-core assets and reinvestment in innovation are expected to support long-term growth. Management cautioned that progress in supply chain and operational execution will be necessary to fully unlock the potential of new and existing product lines, especially as the company transitions Petrifilm production and completes its genomics divestiture.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the successful integration and ramp-up of Petrifilm production, (2) progress in reducing sample collection inefficiencies and excess inventory, and (3) updates on the divestiture process for the genomics business. We will also monitor the impact of new commercial leadership hires and the pace of innovation pipeline development as leading indicators of sustainable margin recovery.

Neogen currently trades at $6.97, up from $5.82 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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