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Catalent (CTLT) Q3 Earnings Lag Estimates, Gross Margin Up

Catalent, Inc. CTLT reported third-quarter fiscal 2024 adjusted loss per share of 6 cents, which was narrower than the year-ago period’s loss per share of 9 cents. The Zacks Consensus Estimate was pegged at an earnings per share (EPS) of 24 cents.

The adjustments include charges related to amortization, and impairment charges and gain/loss on the sale of assets, among others.

The company’s GAAP loss per share was 56 cents during the quarter, narrower than the year-ago period’s loss per share of $1.26.

Revenues in Detail

Revenues grossed $1.07 billion in the reported quarter, up 3.6% year over year. However, the metric missed the Zacks Consensus Estimate by 3.1%.

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At constant exchange rate or CER, revenues were also down 3%.

The top line was driven by strength in the Pharma and Consumer Health (PCH) segment despite being hampered by soft performances in its Biologics segment in the reported quarter.

Organic net revenues (excluding the impact of acquisitions, divestitures and currency translation) increased 3% year over year.

Segments in Detail

Catalent reports via two segments — Biologics and PCH.

Revenues in the Biologics segment fell 2.9% year over year on a reported basis (down 3% at CER) to $461 million in the quarter under review.

Revenues in the PCH segment increased 8.9% from the year-ago period (up 8% at CER) to $613 million.

Catalent, Inc. Price, Consensus and EPS Surprise

Catalent, Inc. Price, Consensus and EPS Surprise
Catalent, Inc. Price, Consensus and EPS Surprise

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

Operational Update

In the quarter under review, Catalent’s gross profit rose 27.2% to $229 million. The gross margin expanded 396 basis points to 21.3%.

Selling, general and administrative expenses rose 12.6% to $214 million year over year.

Adjusted operating profit totaled $15 million against the prior-year quarter’s adjusted operating loss of $10 million.

Financial Update

Catalent exited third-quarter fiscal 2024 with cash and cash equivalents of $162 million compared with $229 million at the end of the fiscal second quarter. Total debt at the third quarter of fiscal 2024-end was $4.98 billion compared with $5.01 billion at the end of the fiscal second quarter.

Cumulative net cash provided by operating activities at the end of third-quarter fiscal 2024 was $54 million compared with $58 million a year ago.

Guidance

Catalent will not provide any outlook in light of the pending transaction with Novo Holdings.

Our Take

Catalent’s year-over-year improvement in its overall top-line and bottom-line results in the third quarter of fiscal 2024 was encouraging. The revenue uptick in the PCH segment was impressive. Management’s confirmation that the company returned to growth, including double-digit non-COVID year-over-year revenue growth, raises our optimism. The continued momentum in both the Biologics and PCH segments, which drove an increase in consolidated sequential revenue and adjusted EBITDA margin for the second consecutive quarter, also looks promising.

However, Catalent exited the quarter with lower-than-expected results. The continued decline in the Biologics segment’s revenues during the period was also disappointing. Catalent also faced escalating operating costs during the quarter, thereby incurring an adjusted operating loss. This was also discouraging.

Zacks Rank and Key Picks

Catalent currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. ALGN, ResMed Inc. RMD and Boston Scientific Corporation BSX.

Align Technology, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2024 adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.

ResMed reported third-quarter fiscal 2024 adjusted EPS of $2.13, beating the Zacks Consensus Estimate by 10.9%. Revenues of $1.19 billion surpassed the Zacks Consensus Estimate by 1.9%. It currently sports a Zacks Rank #1.

ResMed has a long-term estimated growth rate of 10.7%. RMD’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 7.5%.

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