Investor looking stunned in front of plunging graph

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What happened

Shares of Meridian Bioscience, Inc. (NASDAQ:VIVO), a diagnostics-focused life-science company, fell hard at the open Wednesday, and were still off about 19.8% at 12:01 p.m. EST. A significant dividend cut, announced along with a less than superb first-quarter earnings report this morning, is to blame for the market drubbing.

So what

Meridian Bioscience lowered its quarterly payout 37.5%, from an annualized $0.80 to $0.50, and lowered its forward guidance for its fiscal year, which ends in September. When the company reported full fiscal 2016 earnings in November, management had predicted fiscal 2017 earnings would fall between $0.81 and $0.85 per share on net revenue, in the range of $205 million to $210 million. This morning it lowered its full-year earnings expectations to between $0.64 and $0.69 per share, on net revenue of between $193 million and $199 million.

Last March Meridian shelled out $66 million to acquire Magellan Biosciences, largely for its lead-poisoning diagnostic operations. In 2015 Magellan had reported $16 million in sales, and Meridian expected this addition to be accretive to earnings later this year. Declining overall diagnostic sales in light of the recent purchase makes the sting especially painful.

Now what

The company has been trying to diversify its revenue stream away from generally low-margin diagnostic testing services, toward the manufacture and sale of components used in a variety of diagnostic testing procedures. Unfortunately, Meridian's life-science segment isn't growing fast enough to offset weakness in its diagnostic segment. Diagnostic revenue comprised about 72% of fiscal first-quarter revenue, a slight improvement from about 74% of fiscal 2016's top line.

Unfortunately, even the addition of Magellan's operations wasn't enough to offset losses to its core diagnostics business. Fiscal first-quarter diagnostics revenue fell about 0.7% compared to the previous-year period, despite the addition of Magellan's operations.

Luckily, Meridian's life-science segment is growing; revenue from the segment rose 9.6% over the previous year period to $13.0 million, and Meridian might be able to return to growth on the back of this segment. In the incredibly competitive diagnostics arena, though, it might be a good idea to wait for signs of a bottom before you try to catch this falling knife.

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.