Neogen's Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of food safety testing expert Neogen (NAS: NEOG) fell as much as 12.3% today in very heavy morning trading.

So what: The company just reported first-quarter results, missing analyst expectations on both the top and bottom lines. Due to a shift in product sales toward the lower-margin animal safety segment, gross margins also declined by nearly 3% from the year-ago quarter.

Now what: That's not the end of sliding margins, because Neogen is planning to do even more animal-focused business. For example, the company just bought a facility in Kentucky that will "greatly expand our Animal Safety operational capabilities." None of that sounds particularly exciting. On the other hand, Neogen is expanding into new markets like China and Brazil, has a lucrative marketing agreement with chemicals giant EI du Pont de Nemours (NYS: DD) , and is introducing a slew of new products after a mostly dry 2011. This stock earns its four stars on the five-star CAPS scale.

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At the time thisarticle was published Fool contributorAnders Bylundholds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool isinvestors writing for investors.

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