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Investing.com -- Shares of Neogen Corporation (NASDAQ:NEOG) plummeted 20.4% following the company’s announcement at William Blair’s Growth Stock Conference of its plans to divest its genomics business. The divestiture is part of a broader strategy to mitigate the impact of tariffs and focus more intently on its food safety testing segment.
Neogen’s CFO and COO David Naemura conveyed the company’s intention to streamline operations by shedding its cleaners and disinfectants and genomics businesses by fiscal year 2025. This strategic move is expected to result in a revenue reduction of $150 million and a decrease in EBITDA by a low twenties million in fiscal 2026. Naemura emphasized the company’s commitment to improving execution and driving better results amidst challenging conditions.
The decision to sell the genomics business, which had not been previously specified, comes as Neogen aims to enhance its growth acceleration and margin expansion. The company has also undertaken measures to counterbalance the financial repercussions of tariffs, which are projected to have a nominal full-year impact of approximately $5 million based on current rates, thanks to mitigation efforts, agricultural exemptions, pricing adjustments, and supply chain redirection.
Neogen’s focus on operational improvement includes three key areas: growth acceleration, margin expansion, and improved execution. The company is actively marketing the genomics platform, which is a part of its animal safety business, with the sale of the cleaners and disinfectants business already announced.
Investors reacted to the news by selling off Neogen shares, reflecting concerns over the near-term revenue and earnings impact resulting from the divestitures. Despite the company’s strategic rationale for the move, the market’s response underscores the challenges Neogen faces in navigating tariff impacts and refocusing its business portfolio.
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