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Catalent's (CTLT) Q4 Earnings Top Estimates, Margins Rise

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Catalent, Inc. CTLT reported fourth-quarter fiscal 2021 adjusted earnings per share (“EPS”) of $1.16, up 28.9% year over year. The bottom line exceeded the Zacks Consensus Estimate by 11.5%.

The adjustments include charges and benefits related to amortization, financing-related expenses, and acquisition, integration and other special items costs, to name a few.

The company’s GAAP EPS was 97 cents in the quarter, up 14.1% year over year.

Full-year adjusted EPS was $3.04, reflecting a 44.1% increase from the year-ago period. The metric surpassed the Zacks Consensus Estimate by 3.4%.

Revenues in Detail

Revenues grossed $1.19 billion in the reported quarter, up 25.4% year over year (up 22% at constant exchange rate or CER). The metric surpassed the Zacks Consensus Estimate by 5.4%.

The top line was driven by robust segmental performances in the reported quarter.

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

Organic net revenues (excluding the impact of acquisitions and divestitures) increased 26% year over year at CER.

Full-year revenues were $3.99 billion, up 29.2% year over year (up 26% at CER). The metric surpassed the Zacks Consensus Estimate by 1.5%.

Segments in Detail

Revenues at the Biologics segment rose 68.9% year over year (up 66% at CER) to $603 million in the quarter under review. Excluding the impact of acquisitions, net revenues increased by 66%.

Revenues at the Softgel and Oral Technologies segment improved 3.4% from the year-ago period (down 1% at CER) to $301 million.

The Oral and Specialty Delivery arm recorded revenues of $186 million, down 15.1% and 19% on a reported basis and at CER, respectively, year over year. Further, net revenues decreased 4% on excluding the impact of acquisitions and divestitures.

Revenues at the Clinical Supply Services business rose 25% year over year (up 21% at CER) to $105 million.

Operational Update

In the quarter under review, Catalent’s gross profit improved 31.4% to $439 million. Gross margin expanded 168 basis points (bps) to 36.9%.

Selling, general and administrative expenses rose 17.2% to $184 million year over year.

Adjusted operating profit totaled $255 million, rising 44.1% from the prior-year quarter. Adjusted operating margin in the quarter expanded by 277 bps to 21.5%.

Financial Update

Catalent ended fiscal 2021 with cash and cash equivalents of $896 million compared with $953 million at the end of fiscal 2020. Total debt at the end of fiscal 2021 was $3.24 billion compared with $3.02 billion at the end of fiscal 2020.

Cumulative net cash provided by operating activities at the end of fiscal 2021 was $433 million compared with $440 million a year ago.

FY22 Guidance

Catalent has initiated the financial guidance for fiscal 2022.

The company projects revenues within $4.30-$4.50 billion for the full year. The Zacks Consensus Estimate for fiscal 2022 revenues is currently pegged at $4.32 billion.

Our Take

Catalent exited fiscal fourth quarter of 2021 with better-than-expected results. The year-over-year improvement in both the bottom and top lines is impressive. Continued strength in its Biologics arm in the quarter under review is encouraging as well. Robust performances by the Clinical Supply Services, and Softgel and Oral Technologies segments also raise our optimism.

Catalent also announced that it has reached an agreement to acquire Bettera Holdings, LLC, which will complement and accelerate the growth of its global softgel and oral dose formulation and manufacturing business, raising our optimism on the stock. Expansion of both margins bodes well.

However, soft revenues in the Oral and Specialty Delivery segments are concerning.

Zacks Rank and Stocks to Consider

Catalent currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation EHC, West Pharmaceutical Services, Inc. WST and Bio-Rad Laboratories, Inc. BIO.

Encompass Health, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.

Bio-Rad reported second-quarter 2021 adjusted EPS of $3.54, surpassing the Zacks Consensus Estimate by 86.3%. Revenues of $715.9 million surpassed the Zacks Consensus Estimate by 17.3%. It currently carries a Zacks Rank #2.


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