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Catalent (CTLT) Q3 Earnings Beat Estimates, FY22 View Up

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·5 min read
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Catalent, Inc. CTLT reported third-quarter fiscal 2022 adjusted earnings per share (“EPS”) of $1.04, up 26.8% year over year. The bottom line exceeded the Zacks Consensus Estimate by 10.6%.

The adjustments include charges and benefits related to amortization, as well as acquisition, integration and other special items’ costs.

The company’s GAAP EPS was 78 cents in the quarter, down 38.1% year over year.

Revenues in Detail

Revenues grossed $1.27 billion in the reported quarter, up 20.9% year over year. The metric surpassed the Zacks Consensus Estimate by 4.4%.

At constant exchange rate or CER, revenues were up 23%.

The top line was driven by robust performances by most of the segments in the reported quarter.

Organic net revenues (excluding the impact of acquisitions, divestitures and currency translation) increased 20% year over year.

Segments in Detail

Revenues in the Biologics segment rose 28.3% year over year (up 30% at CER) to $698 million in the quarter under review.

Revenues in the Softgel and Oral Technologies segment increased 32.8% from the year-ago period’s level (up 37% at CER) to $324 million.

The Oral and Specialty Delivery arm recorded revenues of $154 million, down 9.9% and 8% on a reported basis and at CER, respectively, year over year.

Revenues in the Clinical Supply Services business rose 1% year over year (up 3% at CER) to $101 million.

Catalent, Inc. Price, Consensus and EPS Surprise

Catalent, Inc. Price, Consensus and EPS Surprise
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 rose 15.6% to $423 million. However, gross margin contracted 153 basis points (bps) to 33.2%.

Selling, general and administrative expenses rose 19.7% to $207 million year over year.

Adjusted operating profit totaled $216 million, rising 11.9% from the prior-year quarter’s level. Adjusted operating margin in the quarter contracted by 136 bps to 16.9%.

Financial Update

Catalent exited the third quarter of fiscal 2022 with cash and cash equivalents of $786 million compared with $849 million at the end of fiscal second quarter. Total debt at the end of the fiscal third quarter was $4.19 billion compared with $4.22 billion at the end of fiscal second quarter.

Cumulative net cash provided by operating activities at the end of third-quarter fiscal 2022 was $370 million compared with $299 million a year ago.

Guidance

Catalent has raised its earlier-provided financial outlook for fiscal 2022.

The company now projects revenues within $4,800 million-$4,900 million for the full year, up from the previous projection of $4,740 million-$4,860 million. The Zacks Consensus Estimate for fiscal 2022 revenues is currently pegged at $4.80 billion, which matches with the lower end of the company’s guidance.

For fiscal 2023, Catalent expects its organic, CER net revenue growth to be in line with its previously announced range of long-term net revenue growth of 8-10% over comparable fiscal 2022 figures. This outlook is based partly on the company’s projection of strong commercial demand for products not related to COVID-19, and increased utilization of both current and recently acquired assets.

Our Take

Catalent exited the third quarter of fiscal 2022 with better-than-expected results. The year-over-year improvement in the top and bottom lines is impressive. Continued strength in its Biologics arm in the quarter under review looks encouraging. Robust performances by the Clinical Supply Services, and Softgel and Oral Technologies segments also raise optimism.

Catalent had undertaken some facility expansion activities during the reported quarter, besides completing some strategic buyouts over the past few months. These developments raise our optimism about the stock. A raised financial outlook for the year also heightens our positivity regarding the stock.

However, the persistence of soft revenues in the Oral and Specialty Delivery segment is a concern. Contraction of both margins in the quarter also raises apprehension.

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 Molina Healthcare, Inc. MOH, UnitedHealth Group Incorporated UNH and Alkermes plc ALKS.

Molina Healthcare, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $4.90, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $7.77 billion outpaced the consensus mark by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Molina Healthcare has an estimated long-term growth rate of 16.4%. MOH’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 1.5%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently has a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.


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