Catalent (CTLT) to Report Q2 Earnings: What's in the Cards?

Catalent, Inc. CTLT is scheduled to report second-quarter fiscal 2022 results on Feb 1, before market open.

– Zacks

In the last-reported quarter, the company’s earnings of 71 cents per share surpassed the Zacks Consensus Estimate by 7.6%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 9.88%, on average.

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

Factors to Note

Biologics Business

Per Catalent’s November 2021 earnings update, the Biologics segment has been witnessing strength over the past few months on the back of continued high demand for COVID-19-related products. Since the volume of work related to COVID-19 vaccines and treatments continues to remain high, the segment is expected to have maintained its strength in the second quarter of fiscal 2022 as well, thereby contributing to revenues.

The company also confirmed during its fiscal first-quarter earnings call that its campus in Bloomington, IN had been undergoing upgrades. These upgrades have served as a key growth driver for Catalent, having enabled the company to quickly scale up high-speed filling lines on behalf of its COVID-19 vaccine customers. As the demand for pandemic-related products continues to remain high, this scaling up of production is likely to have driven Catalent’s fiscal second-quarter top line.

Catalent, Inc. Price and EPS Surprise

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

Catalent, in October 2021, announced an expansion project to add three more commercial-scale viral vector manufacturing suites, and associated support facilities and services at its gene therapy campus in Harmans, MD to meet the growing customer demand. The company also confirmed the completion of the addition of a new high-speed syringe filling line (initially announced in 2019) during its previous earnings call, which is an additional source of growth for the Biologics segment. Apart from this, Catalent continues to benefit from its facility in Anagni, Italy. These developments are likely to have driven the segmental revenues of the to-be-reported quarter.

A notable development in the to-be-reported quarter is the finalization of the technology transfer for NurOwn manufacturing at Catalent’s facility in December 2021. NurOwn is BrainStorm Cell Therapeutics Inc.’s autologous cellular therapy being developed for the treatment of amyotrophic lateral sclerosis, progressive multiple sclerosis and other neurodegenerative diseases.

The Zacks Consensus Estimate for second-quarter Biologics revenues is pegged at $585 million, suggesting a surge of 44.8% 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.

In October 2021, the company opened a new facility in San Diego, CA in response to higher demand from pharmaceutical and biopharmaceutical customers for integrated development, clinical packaging and distribution solutions on the U.S. West Coast. The same month, Catalent opened its new clinical supply facility in the Shiga prefecture of Japan to meet the growing demand for end-to-end services, including primary packaging and white glove services. These developments are likely to have considerably driven segmental revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for fiscal second-quarter Clinical Supply Services revenues stands at $100 million, indicating 6.4% growth from the year-ago quarter’s reported figure.

On the flip side, Catalent’s fiscal 2022 second-quarter top line is likely to have been hurt by lower revenues from its Softgel and Oral Technologies segment, which has been witnessing pandemic-induced headwinds over the past few months. Although the impacts are gradually lessening, revenues are likely to be negatively impacted to some extent by the continued pandemic-led challenging business environment.

However, increased year-over-year demand for both prescription and consumer health products is likely to have pushed up quarterly revenues, thereby partly offsetting the pandemic-led headwinds. Catalent’s closing of the Bettera Holdings buyout in October also raises our optimism.

The Estimate Picture

For second-quarter fiscal 2022, the Zacks Consensus Estimate for total revenues of $1.16 billion implies an improvement of 27.2% from the prior-year quarter’s reported figure.

The consensus estimate for earnings is pegged at 84 cents per share, implying an uptick of 33.3% 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 0.00%. 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.

AMN Healthcare Services, Inc. AMN has an Earnings ESP of +10.29% and a Zacks Rank of 1. AMN has an estimated long-term growth rate of 16.2%.

AMN Healthcare’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.51%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hologic, Inc. HOLX has an Earnings ESP of +1.56% and a Zacks Rank of 2, at present. HOLX has an estimated long-term growth rate of 7.4%.

Hologic’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 29.15%.

Henry Schein, Inc. HSIC has an Earnings ESP of +2.62% and is a Zacks #2 Ranked stock. HSIC has an estimated long-term growth rate of 11.8%.

Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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