Catalent, Inc. (NYSE:CTLT) investors will be delighted, with the company turning in some strong numbers with its latest results. Results were good overall, with revenues beating analyst predictions by 2.9% to hit US$721m. Statutory earnings per share (EPS) came in at US$0.23, some 2.0% above what analysts had expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Catalent's ten analysts is for revenues of US$2.91b in 2020, which would reflect an okay 6.7% increase on its sales over the past 12 months. Statutory earnings per share are expected to soar 27% to US$1.09. In the lead-up to this report, analysts had been modelling revenues of US$2.85b and earnings per share (EPS) of US$1.07 in 2020. So it looks like there's been no major change in sentiment following the latest results, although analysts have made a small increase to to revenue forecasts.
Analysts increased their price target 9.5% to US$70.88, perhaps signalling that higher revenues are a strong leading indicator for Catalent's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Catalent analyst has a price target of US$75.00 per share, while the most pessimistic values it at US$66.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Catalent's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Catalent's revenue growth will slow down substantially, with revenues next year expected to grow 6.7%, compared to a historical growth rate of 9.2% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.3% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkCatalent will grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Catalent going out to 2024, and you can see them free on our platform here..
It might also be worth considering whether Catalent's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.