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Here's Why You Should Retain Catalent (CTLT) Stock For Now

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Catalent, Inc. (CTLT - Free Report) is well poised for growth in the coming quarters, backed by its slew of strategic deals over the past few months. A robust fourth-quarter fiscal 2021 performance, along with few product launches, is expected to contribute further. Stiff competition and forex woes persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 64.2% compared with 34.2% rise of the S&P 500 composite. The industry fell 13.6% in the said time frame.

The renowned global provider of advanced delivery technologies has a market capitalization of $23.61 billion. The company projects 19.7% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 11.27% for the past four quarters, on average.

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Let’s delve deeper.

Strong Q4 Results: Catalent’s solid fourth-quarter fiscal 2021 results, along with year-over-year uptick in both the top and bottom lines, buoy optimism. 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. Expansion of both margins bodes well.

Strategic Deals: We are optimistic about Catalent’s robust growth opportunities via its recent tie-ups and buyouts. The company, in August, announced that it has reached an agreement to acquire Bettera Holdings (a well-known manufacturer in the high-growth gummy, soft chew and lozenge segments), subject to customary conditions.

Also in August, Catalent announced a strategic manufacturing collaboration with clinical-stage pharmaceutical company, DisperSol Technologies, to accelerate the development of multiple DisperSol pharmaceutical products. In July, Catalent inked a development agreement with JOS Pharmaceuticals, according to which the former will commence a viability study for the potential development of a licensed cannabidiol product to be used as an anesthetic premedication. Per the agreement terms, the study will be using Catalent’s proprietary Zydis orally disintegrating tablet technology.

Product Launches: Catalent has been quite active regarding product launches over the past few months. The company, in July, announced the launch of its new OptiDose Design Solution at the Controlled Release Society annual meeting.

Also in July, the company introduced GPEx Lightning, its next-generation cell line development technology. GPEx Lightning combines novel technologies, which include a gene-insertion technology, to further reduce the time period for drug substance development by up to three months, unlike previous timelines.

Downsides

Foreign Exchange Fluctuations: Catalent has significant operations outside the United States. As a result, changes in the exchange rates of these or any other applicable currency to the U.S. dollar will affect the company’s revenues, earnings and cash flows. Volatility in currency exchange rates affects the various currencies in which Catalent conducts business. Such volatility and other changes in exchange rates could result in unrealized and realized exchange losses despite any effort the company may undertake to manage or mitigate its exposure to the same.

Stiff Competition: Catalent operates in a highly competitive market where it competes with multiple companies, including those offering advanced delivery technologies and outsourced dose form or biologics manufacturing. The company also competes in some cases with the internal operations of those pharmaceutical, biotechnology and consumer health customers that also have manufacturing capabilities and choose to source these services internally.

Estimate Trend

Catalent is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 7% north to $3.51.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2022 revenues is pegged at $1.01 billion, suggesting a 19.9% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.

Intuitive Surgical’s long-term earnings growth rate is estimated at 9.7%. It currently carries a Zacks Rank #2.