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3 Reasons to Hold Catalent (CTLT) Stock in Your Portfolio

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Catalent, Inc. (CTLT - Free Report) is well-poised for growth in the coming quarters, backed by its robust facility-expansion activities over the past few months. A robust fourth-quarter fiscal 2022 performance, along with a slew of strategic deals over the past few months, is expected to contribute further. Catalent’s operation in a competitive landscape and forex woes pose threats.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 33.9% compared with the 29.8% fall of the industry and 12.4% decline of the S&P 500.

The renowned global provider of advanced delivery technologies has a market capitalization of $16.18 billion. Catalent projects 14% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 7.2% for the past four quarters, on average.

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Let’s delve deeper.

Expansionary Activities: We are upbeat about Catalent’s robust expansionary activities, like opening a slew of facilities over the past few months. In September, the company announced a $2.2 million expansion to its clinical supply facility in Singapore, which will allow the installation of 35 new freezers for ultra-low temperature storage.

In June, the company announced that it had expanded its primary packaging capabilities at its clinical supply facility in Shiga, Japan.

Strategic Deals: We are optimistic about Catalent’s robust growth opportunities via its recent tie-ups and buyouts. The company, in June, entered into a development agreement with MigVax to leverage its proprietary Zydis Bio orally disintegrating tablet technology for delivering the MigVax-101 vaccine.

Catalent, in August, announced reaching an agreement to acquire Metrics Contract Services, a full-service specialty Contract Development and Manufacturing Organization with a facility in Greenville, NC, from Mayne Pharma Group Limited.

Strong Q4 Results: Catalent’s solid fourth-quarter fiscal 2022 results with year-over-year improvement in the top and bottom lines are impressive. Continued strength in its Biologics arm and robust performances by the Oral and Specialty Delivery, and Softgel and Oral Technologies segments also raise optimism. Expansion of gross margin bodes well.

Downsides

Forex Woes: Catalent has significant operations outside the United States. Hence, changes in the exchange rates or any other applicable currency to the U.S. dollar will affect its operations. Volatility in currency exchange rates 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 fluctuations in the values of various currencies.

Stiff Competition: Catalent operates in a highly competitive market, wherein 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 pharmaceutical, biotechnology and consumer health customers with manufacturing capabilities and chooses to source these services internally.

Estimate Trend

Catalent has been witnessing a negative estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 8.7% south to $3.86.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2023 revenues is pegged at $1.07 billion, suggesting a 4.6% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .

AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has lost 4.3% compared with the industry’s 35.9% fall in the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has gained 33.4% against the industry’s 31.5% fall over the past year.

McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.

McKesson has gained 71.5% against the industry’s 15% fall over the past year.

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