NEOG

Neogen ($NEOG) Executives Go 'All-In' After 68% Crash...3M Integration Delays vs Bottom Signal

11/07/2025 17:25

Neogen ($NEOG) presents investors with a stark question: Has this food safety diagnostics leader truly bottomed out after its devastating 68% decline from $13.72 in June 2024 to $4.39 in April 2025, or is this merely a pause in a deeper downturn? Neogen Corporation is a global leader in food and animal safety solutions, providing diagnostic test kits, genomics services, sanitation products, and veterinary instruments. The company's 2021 acquisition of 3M's Food Safety business significantly expanded its scale, but the integration challenges from this deal have become the primary catalyst for the current stock malaise. The most compelling signal emerged in April 2025 through an extraordinary cluster of insider buying precisely as shares hit historic lows. CAO John Patrick Moylan purchased 10,000 shares at $5.07, while Director Jeffrey Capello bought 20,712 shares at $4.84. Most impressive was Director James Borel's conviction, acquiring 65,000 shares across two days for approximately $320,000. This coordinated insider buying was no coincidence. Company insiders possess superior information about business fundamentals, and their aggressive purchasing at the $4-5 level suggests this price range represents substantial undervaluation relative to intrinsic worth. Indeed, shares have since recovered to $5.46, representing over 20% gains from the April lows. However, insider confidence alone cannot overcome fundamental headwinds. Neogen's recent quarterly results remain disappointing. Adjusted earnings per share dropped to 10 cents for the quarter ended February 2025, down from 12 cents year-over-year, while revenue declined 3.4% to $220.98 million. The 3M integration inefficiencies persist, creating margin pressure and operational disruptions. Particularly concerning is the persistent revenue decline trend, falling from $236.79 million in May 2024 to $220.98 million in February 2025. The Food Safety segment shows mixed performance with Natural Toxins & Allergens testing declining 2% while Bacterial & General Sanitation grew 4.4%, highlighting uneven demand patterns. Yet transformation signals are emerging. November's appointment of Bryan Riggsbee as CFO brings extensive diagnostics and healthcare experience, potentially reshaping capital allocation and operational discipline. The company projects a significant turnaround by 2028, forecasting revenues of approximately $859.1 million with positive earnings of $107.3 million. April's $130 million divestiture of the cleaners and disinfectants unit to Kersia Group provides additional optimism. This transaction enhances margins while enabling greater focus on core food safety diagnostics, with $100 million of proceeds designated for credit facility repayment. Analyst fair value estimates range from $8.17 to $14.15 per share, implying minimum 32% upside potential from current levels. The average rating remains 'Buy,' though price targets have been reduced from previous $20 levels to $15-16 ranges, reflecting integration uncertainty. Investors should monitor specific catalysts closely. Next quarter's results must demonstrate tangible 3M integration progress through revenue stabilization and margin improvement. Conversely, continued integration delays or market share erosion would signal additional downside risks. The new CFO's strategic initiatives represent a second critical watchpoint. Riggsbee's cost reduction plans and operational efficiency roadmap will prove decisive in restoring investor confidence. Neogen's investment case currently embodies a complex risk-reward profile. The combination of 68% decline, bottom-tier pricing, and massive insider buying creates compelling value potential. However, persistent operational challenges and integration risks remain meaningful headwinds. This dilemma ultimately hinges on 3M integration success, which should clarify within the next 2-3 quarters.