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Catalent (CTLT) to Report Q3 Earnings: What's in the Cards?

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Catalent, Inc. (CTLT - Free Report) is scheduled to report third-quarter fiscal 2022 results on May 3, before market open.

In the last-reported quarter, the company’s earnings of 90 cents per share surpassed the Zacks Consensus Estimate by 7.1%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 8.5%, on average.

Let’s see how things have shaped up prior to this announcement:

Factors to Note

Biologics Business

Per Catalent’s fiscal second-quarter earnings update, its Biologics segment has been witnessing strength over the past few months on the back of continued high utilization of its drug product assets. This trend is likely to have continued in the fiscal third quarter, thereby contributing to revenues.

Catalent’s campus in Bloomington, IN, which had served as a key growth driver for the company by enabling it to quickly scale high-speed filling lines on behalf of its COVID-19 vaccine customers, is likely to have maintained its strength on the back of continued demand.

Catalent’s fiscal third-quarter revenues are likely to have been driven by its commercial-scale viral vector manufacturing suites, as well as by associated support facilities and services at its gene therapy campus in Harmans, MD (expansion project was announced in October 2021). During the same time, the company had completed the addition of a new high-speed syringe filling line (initially announced in 2019). Apart from this, Catalent continues to benefit from its facility in Anagni, Italy. These developments are likely to have contributed to segmental revenues in the to-be-reported quarter.

Catalent, Inc. Price and EPS Surprise

Catalent, Inc. Price and EPS Surprise

Catalent, Inc. price-eps-surprise | Catalent, Inc. Quote

In March 2022, Catalent had announced the completion of a $30-million (€27 million) project at its facility in Limoges, France. The project completion is expected to convert the site into a European center of excellence for biopharmaceutical development, drug product fill/finish services and packaging. This raises our optimism regarding the stock.

However, the company's expected decelaration of the segment’s revenue growth rate in the second half of fiscal 2022 compared with higher levels of COVID-19-related production since the back half of fiscal 2021, raises apprehension about the stock.

The Zacks Consensus Estimate for third-quarter Biologics revenues is pegged at $612 million, suggesting an improvement of 12.5% from the year-ago quarter’s reported figure.

Oral and Specialty Delivery

In March 2022, Catalent announced its collaboration with TFF Pharmaceuticals, Inc. with respect to the latter’s patented Thin Film Freezing (“TFF”) technology. The tie-up agreement focuses on the generation, testing and manufacture of dry powder formulations for a variety of biotherapeutics via the application of the TFF technology.

In January, Catalent announced that it had completed a $10-million expansion at its isolator units at its Malvern, PA and Dartford, U.K. facilities to provide advanced containment capabilities for the micronization of highly potent drug compounds. Also in January, Catalent launched its new Xpress Pharmaceutics service, designed to accelerate the development of oral drugs through Phase 1 clinical studies. These developments are expected to have driven the revenues for its Oral and Specialty Delivery segment.

Rising demand for orally delivered Zydis commercial products is also expected to have driven the segmental revenues in the fiscal third quarter.

Other Factors

Catalent’s Clinical Supply Services arm is likely to have continued its strength in the to-be-reported quarter on the back of strong demand for the company’s manufacturing and packaging, and storage and distribution offerings. In January, Catalent announced that it had increased cold chain packaging capabilities at its Philadelphia, PA facility to support increased demand for the distribution of biologic drugs, and advanced cell and gene therapies. This is likely to have pushed up revenues of Catalent’s Clinical Supply Services arm.

The Zacks Consensus Estimate for fiscal third-quarter Clinical Supply Services revenues stands at $105 million, indicating 5% growth from the year-ago quarter’s reported figure.

Catalent’s fiscal 2022 third-quarter top line is likely to have been boosted by improving product sales from its Softgel and Oral Technologies segment, which had suffered due to pandemic-induced headwinds. Over the past few months, the segment has been experiencing a recovery from pandemic-related headwinds and is expected to have benefited from the Bettera Holdings acquisition.

The Estimate Picture

For third-quarter fiscal 2022, the Zacks Consensus Estimate for total revenues of $1.22 billion implies an improvement of 15.8% from the prior-year quarter’s reported figure.

The consensus estimate for earnings is pegged at 94 cents per share, implying an uptick of 14.6% from the prior-year quarter’s reported number.

What Our Model Suggests

Our proven model predicts an earnings beat for Catalent this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Catalent has an Earnings ESP of +0.31%. 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 #3.

Other Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle:

Meridian Bioscience, Inc. (VIVO - Free Report) has an Earnings ESP of +26.32% and a Zacks Rank of 2. Meridian Bioscience has an earnings yield of 5.2% compared with the industry’s 0.9%.

Meridian Bioscience’s earnings surpassed estimates in three of the trailing four quarters, with the average surprise being 9.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Qiagen N.V. (QGEN - Free Report) has an Earnings ESP of +0.14% and is a Zacks #2 Ranked stock. Qiagen has an estimated long-term growth rate of 11.5%.

Qiagen’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.8%.

Avanos Medical, Inc. (AVNS - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank of 1. Avanos Medical has an earnings yield of 5.4% against the industry’s negative yield.

Avanos’ earnings surpassed estimates in two of the trailing four quarters, with the average surprise being 6.7%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.