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Narrow-moat Neogen reported decent fiscal second-quarter results with 10% organic sales growth exceeding our expectations, though growth was offset by higher operating costs. We maintain our $24 fair value estimate. We would anticipate a $2 increase to valuation if the U.S. corporate tax rate remains at 21%, however, we would still view shares as materially overvalued even in this scenario.
Neogen Corporation, headquartered in Lansing, Michigan, develops, manufactures, and markets various products for food and animal safety. In food safety (70% of post-merger sales), Neogen performs diagnostics to detect unintended substances in food and animal feed, such as pathogens, allergens, and drug residues, for global food and feed processing companies. In animal safety (20% of post-merger sales), Neogen sells veterinary instruments, pharmaceuticals, disinfectants, and genomics tests for animals, including cattle, horses, and canines. Sales in the United States account for 60% of total revenue, while international markets, including Canada, Europe, Asia, and Latin America, account for the remaining 40%.
