Catalent (CTLT) to Report Q1 Earnings: What's in Store?

Catalent, Inc. CTLT is scheduled to report first-quarter fiscal 2022 results on Nov 2, before market open.

In the last-reported quarter, the company’s earnings of $1.16 per share surpassed the Zacks Consensus Estimate by 11.5%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 11.27%, on average.

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

Factors to Note

Biologics Business

Per Catalent’s August 2021 earnings update, the Biologics segment has been witnessing strength over the past few months on the back of robust demand for drug product, drug substance and viral vector offerings, and bioanalytical services. As the volume of work related to COVID-19 vaccines and treatments remains high, the segment is expected to have maintained its strength in the first quarter of fiscal 2022 as well, thereby contributing to revenues.

In July, the company introduced GPEx Lightning, its next-generation cell line development technology. GPEx Lightning combines novel technologies, which include a gene insertion technology, to further reduce the time period for drug substance development by up to three months, unlike previous timelines. This is likely to have contributed to the company’s fiscal first-quarter revenues.

Catalent has been advancing its global Fill-Finish capacity over the past few months, and has already completed the addition of two new suites at its biologics drug substance development and manufacturing facility in Madison, WI. The company has been ramping up the expansion since the last few months and is expected to have boosted Catalent’s production capacities in the to-be-reported quarter.

This apart, the company had confirmed its entry into the plasmid DNA technology and production space via the acquisition of Delphi Genetics (in February) and the launch of plasmid DNA development manufacturing services through an organic investment in a Rockville, MD facility (in May). These two actions have enabled the company to establish plasmid DNA presence in both Europe and the United States. These are likely to have considerably driven segmental revenues in the first-quarter fiscal 2022.

Catalent, Inc. Price and EPS Surprise

Catalent, Inc. Price and EPS Surprise

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

The Zacks Consensus Estimate for first-quarter Biologics revenues is pegged at $565 million, suggesting a surge of 49.9% from the year-ago quarter’s reported figure.

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.

The company, during its fiscal 2021 fourth-quarter earnings call in August, confirmed that it had completed the build-out of its good manufacturing practices cell therapies suites in Houston, TX, and had begun manufacturing for clinical supply. Further, the company has been working toward implementation of initiatives to rapidly expand its capacity to meet the growing clinical supply needs. These are likely to have boosted the segmental revenues in the fiscal 2022 first quarter.

The Zacks Consensus Estimate for fiscal first-quarter Clinical Supply Services revenues stands at $101 million, indicating 8.6% growth from the year-ago quarter’s reported figure.

On the flip side, Catalent’s fiscal 2022 first-quarter top line is likely to have been hurt by lower revenues from its Softgel and Oral Technologies segment, which has been witnessing pandemic-related headwinds over the past few months. Although the impacts are gradually lessening, revenues are likely to be impacted to some extent due to the continued pandemic-led challenging business environment. However, the company’s launch of its new OptiDose Design Solution (in July) is likely to have pushed up the quarterly revenues, thereby partly offsetting the pandemic-led headwinds. Catalent’s buyout agreement with Bettera Holdings, as well as the commercial supply agreement with Edenbridge Pharmaceuticals for a novel formulation of glycopyrrolate using Catalent’s proprietary Zydis orally disintegrating tablet delivery technology (both in August), raises our optimism.

The Estimate Picture

For first-quarter fiscal 2022, the Zacks Consensus Estimate for total revenues of $1.01 billion implies an improvement of 19.9% from the prior-year quarter’s reported figure.

The consensus estimate for earnings is pegged at 66 cents per share, implying an uptick of 53.5% from the prior-year quarter’s reported number.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Catalent has an Earnings ESP of -0.87%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

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.

Insulet Corporation PODD has an Earnings ESP of +15.79% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom, Inc. DXCM has an Earnings ESP of +5.46% and a Zacks Rank of 2, at present.

West Pharmaceutical Services, Inc. WST has an Earnings ESP of +1.93% and is a Zacks #2 Ranked stock.

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Catalent, Inc. (CTLT) : Free Stock Analysis Report

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