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Catalent (CTLT) Q2 Earnings Top Estimates, FY22 View Up

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Catalent, Inc. (CTLT - Free Report) reported second-quarter fiscal 2022 adjusted earnings per share (EPS) of 90 cents, up 42.9% year over year. The bottom line exceeded the Zacks Consensus Estimate by 7.1%.

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 52 cents in the quarter, up 15.6% year over year.

Revenues in Detail

Revenues grossed $1.22 billion in the reported quarter, up 33.6% year over year. The metric surpassed the Zacks Consensus Estimate by 5.1%.

At constant exchange rate or CER, revenues were up 35%.

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

Organic net revenues (excluding the impact of acquisitions, divestitures and currency translation) increased 32% year over year.

Segments in Detail

Revenues in the Biologics segment rose 57.9% year over year (up 60% at CER) to $638 million in the quarter under review.

Revenues in the Softgel and Oral Technologies segment increased 33.2% from the year-ago period’s levels (up 36% at CER) to $329 million.

The Oral and Specialty Delivery arm recorded revenues of $156 million, down 8.2% and 8% on a reported basis and at CER, respectively, year over year.

Revenues in the Clinical Supply Services business rose 6.5% year over year (up 7% at CER) to $99 million.

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 35.9% to $405 million. Gross margin expanded 57 basis points (bps) to 33.3%.

Selling, general and administrative expenses rose 38.2% to $228 million year over year.

Adjusted operating profit totaled $177 million, rising 33.1% from the prior-year quarter’s levels. Adjusted operating margin in the quarter contracted by 6 bps to 14.5%.

Financial Update

Catalent exited the second quarter of fiscal 2022 with cash and cash equivalents of $849 million compared with $1.97 billion at the end of the fiscal first quarter. Total debt at the end of the fiscal second quarter was $4.22 billion compared with $4.30 billion at the end of fiscal first quarter.

Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2022 was $232 million compared with $224 million a year ago.

FY22 Guidance

Catalent has raised its earlier-provided financial outlook for the year. The company projects revenues within $4,740 million-$4,860 million for the full year, up from the previous projection of $4,620 million-$4,820 million. The Zacks Consensus Estimate for fiscal 2022 revenues is currently pegged at $4.72 billion.

Our Take

Catalent exited the second quarter of fiscal 2022 with better-than-expected results. The year-over-year improvement in the top and the 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 finalized the technology transfer for BrainStorm Cell Therapeutics Inc.’s NurOwn manufacturing at its facility in December 2021. The company had also undertaken some facility expansion activities during the reported quarter. These developments raise our optimism on the stock. Expansion of the gross margin bodes well. 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 adjusted operating margin in the quarter also raises apprehension.

Zacks Rank and Key Picks

Catalent currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks that are supposed to report earnings soon are Cerner Corporation , Baxter International (BAX - Free Report) and AMN Healthcare Services, Inc. (AMN - Free Report) .

The Zacks Consensus Estimate for Cerner’s fourth-quarter 2021 adjusted EPS is currently pegged at 88 cents. The consensus estimate for fourth-quarter 2021 revenues is pegged at $1.49 billion. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cerner has an estimated long-term growth rate of 12.8%. CERN’s earnings yield of 4% compares favorably with the industry’s negative yield.

Baxter currently has a Zacks Rank #1. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $1.03. The consensus estimate for fourth-quarter revenues is pinned at $3.35 billion.

Baxter has an estimated long-term growth rate of 9.5%. BAX’s earnings yield of 4.9% compares favorably with the industry’s negative yield.

AMN Healthcare currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its fourth-quarter 2021 adjusted EPS is currently pegged at $2.58. The consensus estimate for its revenues stands at $1.28 billion.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings yield of 6.7% compares favorably with the industry’s 1.1%.

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