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Catalent (CTLT) Down 6.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Catalent (CTLT - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Catalent due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Catalent Preliminary Q4 Revenues Dampened by Lower Sales

Catalent reported preliminary fourth-quarter fiscal 2023 adjusted earnings per share of 9 cents, down 91.7% from the year-over-year period. The Zacks Consensus Estimate was 10 cents.

The adjustments include charges related to amortization, and acquisition, integration and other special items’ costs, among others.

The company’s GAAP loss per share was 48 cents during the quarter against the year-over-year period’s earnings per share of 93 cents.

Revenues in Detail

Per the preliminary report, revenues grossed $1.07 billion in the reported quarter, down 17% year over year. However, the metric surpassed the Zacks Consensus Estimate by 1.7%.

At CER, revenues were also down 17%.

The top line was hampered by soft performances in its Biologics segment in the reported quarter.

Organic net revenues (excluding the impact of acquisitions, divestitures and currency translation) decreased 19% year over year.

Per the preliminary report, full-year revenues were $4.28 billion, reflecting a 10.9% decline from the comparable fiscal 2022 period. However, the figure topped the Zacks Consensus Estimate by 0.5%.

At CER, revenues were down 9%.

Segments in Detail

Per Catalent’s new organizational structure, it reports via two segments — Biologics and Pharma and Consumer Health.

Per the preliminary report, revenues in the Biologics segment fell 37.1% year over year on a reported basis (down 37% at CER) to $406 million in the quarter under review.

Per the preliminary report, revenues in the Pharma and Consumer Health segment increased 2.9% from the year-ago period (up 3% at CER) to $662 million.

Operational Update

In the quarter under review, Catalent’s gross profit fell 49.1% to $235 million. The gross margin contracted a huge 1389 basis points to 22%.

Selling, general and administrative expenses fell 3.1% to $219 million year over year.

Adjusted operating profit totaled $16 million, reflecting a 93.2% decline from the prior-year quarter’s level. Adjusted operating margin in the fiscal fourth quarter contracted a huge 1684 bps to 1.5%.

Financial Update

Catalent exited fiscal 2023 with cash and cash equivalents of $280 million compared with $449 million at the end of fiscal 2022. Total debt at the fiscal 2023-end was $4.85 billion compared with $4.20 billion at the end of fiscal 2022.

Cumulative net cash provided by operating activities at the end of fiscal 2023 was $261 million compared with $439 million a year ago.

Guidance

Catalent has initiated its financial outlook for fiscal 2024.

The company projects revenues between $4,300 million and $4,500 million for the full year. The Zacks Consensus Estimate for fiscal 2024 revenues is currently pegged at $4.21 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -289.08% due to these changes.

VGM Scores

At this time, Catalent has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Catalent has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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