Catalent, Inc. (CTLT Quick QuoteCTLT - Free Report) is well-poised for growth in the coming quarters, courtesy of its product and service launches over the past few months. The optimism led by a solid second-quarter fiscal 2023 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 29% compared with the 13.9% decline of the industry and 7.9% fall of the S&P 500.

The renowned global developer and supplier of better treatments has a market capitalization of $12.57 billion. Catalent projects 7.7% growth for the next five years and expects to maintain its strong performance. Catalent’s earnings yield of 4.5% is favorable to the industry’s negative yield.

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Let’s delve deeper.

Product and Service Launches: We are upbeat about Catalent’s product and service launches over the past few months. Last month, the company announced the launch of TASCENSO orally disintegrating tablet (ODT), its first product to treat multiple sclerosis patients in the United States.

In January, Catalent announced the launch of its new Case Management Service, specifically designed to address the unique challenges associated with the safe and timely delivery of advanced therapies to patients by providing professional supply chain oversight from program start to finish.

Strategic Deals: We are optimistic about Catalent’s robust growth opportunities via its recent tie-ups and buyouts. During its second-quarter fiscal 2023 earnings call in February, the company confirmed that it had extended its collaboration with Moderna to broaden manufacturing partnership across multiple products and formats in North America and Europe.

In January, Catalent announced that it had executed a development and license agreement with Ethicann Pharmaceuticals Inc. to develop Ethicann’s clinical drug pipeline using Catalent’s proprietary Zydis ODT technology.

Strong Q2 Results: Catalent’s solid second-quarter fiscal 2023 fall results buoy optimism. The year-over-year improvement in the Pharma and Consumer Health segment at constant exchange rate is impressive. The expansion of the gross margin bodes well. Catalent has undertaken some facility expansion activities over the past few months, raising our optimism.

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 2.2% south to $3.11.

The Zacks Consensus Estimate for the company’s third-quarter fiscal 2023 revenues is pegged at $1.15 billion, suggesting a 9.7% decline from the year-ago quarter’s reported number.

This compares to our third-quarter fiscal 2023 revenue estimate of $1.17 billion, suggesting an 8.1% plunge from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX Quick QuoteHOLX - Free Report) , McKesson Corporation (MCK Quick QuoteMCK - Free Report) and Avanos Medical, Inc. (AVNS Quick QuoteAVNS - Free Report) .

Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.

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

Hologic has gained 11.4% against the industry’s 11.9% decline in the past year.

McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 3.4%.

McKesson has gained 20.8% against the industry’s 5.8% decline over the past year.

Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.

Avanos has lost 13.3% compared with the industry’s 11.9% decline over the past year.