Catalent (CTLT) Q1 Earnings Lag Estimates, FY23 View Cut
Catalent, Inc. CTLT reported first-quarter fiscal 2023 adjusted earnings per share (EPS) of 34 cents, down 52.1% year over year. The bottom line missed the Zacks Consensus Estimate by 38.2%.
The adjustments include charges and benefits related to amortization, and acquisition, integration and other special items’ costs, among others.
The company’s GAAP EPS broke even during the quarter compared with the year-earlier EPS of 49 cents per share.
Revenues in Detail
Revenues grossed $1.02 billion in the reported quarter, down 0.3% year over year. The metric lagged the Zacks Consensus Estimate by 4%.
At constant exchange rate or CER, revenues were up 4%.
The top line was driven by robust performance by its Pharma and Consumer Health segment in the reported quarter.
Organic net revenues (excluding the impact of acquisitions, divestitures and currency translation) decreased 1% year over year.
Segments in Detail
Per Catalent’s new organizational structure, it reports via two segments — Biologics, and Pharma and Consumer Health.
Revenues in the Biologics segment fell 4.6% year over year (down 2% at CER) to $523 million in the quarter under review.
Revenues in the Pharma and Consumer Health segment increased 4.6% from the year-ago period’s level (up 11% at CER) to $499 million.
Catalent, Inc. Price, Consensus and EPS Surprise
Catalent, Inc. price-consensus-eps-surprise-chart | Catalent, Inc. Quote
Operational Update
In the quarter under review, Catalent’s gross profit fell 20.4% to $258 million. Gross margin contracted 637 basis points (bps) to 25.2%.
Selling, general and administrative expenses rose 7.1% to $196 million year over year.
Adjusted operating profit totaled $62 million, declining 56% from the prior-year quarter’s level. The adjusted operating margin in the quarter contracted by 769 bps to 6.1%.
Financial Update
Catalent exited the first quarter of fiscal 2023 with cash and cash equivalents of $281 million compared with $449 million at the end of fiscal 2022. Total debt at the end of first-quarter fiscal 2023 was $4.204 billion compared with $4.202 billion at the end of fiscal 2022.
Net cash used in operating activities at the end of first-quarter fiscal 2023 was $92 million against net cash provided by operating activities of $163 million a year ago.
Guidance
Catalent has lowered its financial outlook for fiscal 2023.
The company now projects revenues within $4,625 million-$4,875 million for the full year, lowered from the earlier-provided outlook of $4,975 million-$5,225 million. The Zacks Consensus Estimate for fiscal 2023 revenues is currently pegged at $5.06 billion.
Our Take
Catalent exited the first quarter of fiscal 2023 with lower-than-expected results. Dismal overall top-line and bottom-line performances, along with decline in Biologics revenues, during the period is disappointing. The contraction of both margins in the quarter also raises apprehension. Catalent lowered its revenue outlook for the full fiscal year, which further raises our apprehension.
On a positive note, the year-over-year improvement in the Pharma and Consumer Health segment is impressive. Catalent had undertaken some facility expansion activities during the reported quarter besides inking some strategic deals over the past few months. These developments raise our optimism about the stock.
Zacks Rank and Key Picks
Catalent currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Merit Medical Systems, Inc. MMSI.
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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