Catalent (CTLT) to Report Q1 Earnings: What's in the Cards?
Catalent, Inc. CTLT is scheduled to report its first-quarter fiscal 2024 results on Nov 15, before market open.
In the last reported quarter, the company’s preliminary earnings per share of 9 cents lagged the Zacks Consensus Estimate by a penny. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on one occasion and missed in the other three, delivering a negative earnings surprise of 6.1%, on average.
Let’s see how things have shaped up prior to this announcement.
Factors to Note
Biologics Business
On the preliminary fourth-quarter fiscal 2023 earnings call in August, management stated that the margin issues in the Biologics segment over the past few months have continued to weigh on the segment’s performance in the reported quarter. Management also stated that the margins were being impacted by significant investments made at Catalent’s facilities operating in new modalities, including cell therapies and plasmids.
Management also confirmed that its prior expectation for high growth related to these assets in fiscal 2023 did not materialize. This resulted in the facilities currently experiencing a lower level of utilization and running below breakeven levels. This has led to a decrease in the EBITDA margin of the Biologics segment in the fiscal fourth quarter.
Although management confirmed that it continues to actively address all aspects of this imbalance to maximize its ability to effectively leverage these assets and deliver value to all stakeholders in the near term, it raises our apprehension about Catalent’s performance in the first quarter of fiscal 2024.
The segment’s performance in the fourth quarter of fiscal 2023 was also hampered by lower revenues from both COVID and non-COVID sources. Lower revenues from COVID sources are worrying from a business perspective. On a non-COVID basis, Biologics revenues were impacted by weakness in Catalent’s core gene therapy business. This is likely to have continued in the fiscal first quarter, thereby weighing on the company’s performance.
However, management’s confirmation that the non-COVID business is expected to deliver strong performance on the back of growth in Catalent’s non-COVID Biologics portfolio (primarily driven by significant growth from its largest customer and completion of tech transfer activities) raises optimism about the company’s fiscal first-quarter performance.
We estimate the fiscal first-quarter Biologics revenues to be $432.2 million, suggesting a decline of 17.4% from the year-ago quarter’s reported figure.
Catalent, Inc. Price and EPS Surprise
Catalent, Inc. price-eps-surprise | Catalent, Inc. Quote
Pharma and Consumer Health
In the last reported quarter, the segment's revenue growth continued to benefit from Catalent’s acquired Metrics business. The company is likely to have gained from the acquired business in the fiscal first quarter as well, thereby pushing up the segmental revenues.
On the fourth quarter of fiscal 2023 earnings call, management was optimistic about the resolution of its supply-chain issues related to one of Catalent’s top products. Per management, new production orders were already underway. This raises our optimism about the segment’s performance in the first quarter of fiscal 2024.
We estimate the fiscal first-quarter Pharma and Consumer Health revenues to be $505.3 million, suggesting an improvement of 1.3% from the year-ago quarter’s reported figure.
The Estimate Picture
For first-quarter fiscal 2024, the Zacks Consensus Estimate for total revenues of $933.2 million implies a decline of 8.7% from the prior-year quarter’s reported figure.
The consensus estimate for loss per share is pegged at 13 cents.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.
Earnings ESP: Catalent has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
Stocks Worth a Look
Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
HealthEquity, Inc. HQY has an Earnings ESP of +9.57% and a Zacks Rank of 1. HQY has an estimated long-term growth rate of 26.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
HealthEquity’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 13%.
American Eagle Outfitters, Inc. AEO has an Earnings ESP of +5.50% and a Zacks Rank of 1. AEO has an estimated long-term growth rate of 15.8%.
American Eagle’s earnings surpassed estimates in three of the trailing four quarters and broke even once, with the average surprise being 43.2%.
Walmart Inc. WMT has an Earnings ESP of +0.63% and carries a Zacks Rank of 2 at present. WMT has an estimated long-term growth rate of 7.5%.
Walmart’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 11.6%.
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Catalent, Inc. (CTLT) : Free Stock Analysis Report
