Yahoo Finance Here's Why You Should Retain Catalent (CTLT) Stock for Now
Catalent, Inc. CTLT 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 series of strategic deals over the past few months, is expected to contribute further. Forex woes and Catalent’s operation in a competitive landscape pose threats.
So far this year, this Zacks Rank #3 (Hold) stock has gained 45.4% against the industry’s 1.9% decline. The S&P 500 Index gained 7.5% in the same time frame.
The renowned global developer and supplier of advanced treatments has a market capitalization of $12.11 billion. Catalent projects 7.7% growth over the next five years and expects to maintain its strong performance. The company’s earnings yield is 4.6% against the industry’s negative yield of 29.8%.
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Let’s delve deeper.
Product and Service Launches: We are positive about CTLT’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 publicized 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. The company intended to do so by providing professional supply chain oversight from program start to finish.
Strategic Deals: Catalent’s robust growth opportunities via its recent tie-ups and buyouts raise optimism. On 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 Europe and North America.
In January, CTLT announced that it had entered into a development and license agreement with Ethicann Pharmaceuticals Inc. to develop Ethicann’s clinical drug pipeline. For this, Catalent would use its proprietary Zydis ODT technology.
Strong Q2 Results: The company’s solid second-quarter fiscal 2023 fall results buoy optimism. The year-over-year improvement in its Pharma and Consumer Health segment at constant exchange rate is impressive. The expansion of the gross margin bodes well. Catalent has also undertaken some facility expansion activities over the past few months that further raise 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 might result in unrealized and realized exchange losses. This could happen despite any initiative taken by the company to manage or mitigate its exposure to fluctuations in various currency values.
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. In some cases, the company also competes 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 stable estimate revision trend for fiscal 2023. The Zacks Consensus Estimate for its earnings remained steady at $3.11 per share in the past 30 days.
The consensus estimate for CTLT’s third-quarter fiscal 2023 revenues is pegged at $1.15 billion, indicating a 9.8% decline from the year-ago quarter’s reported number. Our estimate for the company’s third-quarter fiscal 2023 revenues is $1.17 billion, indicating a 8.1% plunge from the year-ago quarter.
Catalent, Inc. Price
Catalent, Inc. price | Catalent, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are Becton, Dickinson and Company BDX, Henry Schein HSIC and The Cooper Companies COO.
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So far this year, BDX’s shares have lost 2.9% against the industry’s 5.6% growth.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 18.3%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 2.97%.
So far this year, the company’s shares have gained 2.4% compared with the industry’s 5.6% growth.
The Cooper Companies, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 11%. COO’s earnings missed estimates in each of the trailing four quarters, the average negative surprise being 1.82%.
So far this year, the company’s shares have gained 11.4% compared with the industry’s 5.2% growth.
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