Another Blowout Quarter For Catalent, Inc
Catalent, Inc (NYSE: CTLT) is well-positioned within the biopharma industry as a manufacturer of treatments and provider of manufacturing services. The company has sustained a high level of double-digit growth for years that is only now beginning to slow. That said, the company is actively leveraging its strong balance sheet to acquire and spur growth, and that is driving shareholder value to new highs. After looking at the charts and reviewing the fiscal fourth-quarter report we think the analyst's consensus reported by PriceTargets.com is way off. This stock is not only headed higher but up at least 25% in the next few months.
Catalent, Inc. Beats Consensus And Raises Guidance
Catalent, Inc had a good fourth quarter in which business was supported by growth in three of its four primary operating segments. The $1.19 Billion in consolidated revenue is up 25.7% over last year and beat the consensus by 440 basis points. This year's 25.7% growth is on top of a strong comp last year which resulted in a 64% increase in revenue versus calendar 2019. On an organic basis, growth is up 26% and offset by the company's repositioning efforts over the past year.
On a segment basis, all but one segment saw growth and two of the three that did grow, grew by double digits. The Biologic segment, which accounts for about 50% of revenue give or take, grew by 69% over last year while the Clinical segment grew only 25% and the Soft Gels segment a tepid 3%. This was all offset by a -15% decline in the Orals segment that was compounded by divestiture during the year. On an adjusted basis, sales in the Oral department shrank only 4%.
Moving down the report, the company managed to expand margins by about 90 basis points to help drive solid results on the bottom line. The GAAP earnings of $0.97 are up about 15% from last year and beat the consensus by $0.15 while the adjusted earnings of $1.16 are up 30% from last year and beat consensus by a nickel.
Looking forward, the company is expecting organic and acquisitional strength to continue in fiscal 2022. The company is guiding revenue growth to the range of 8% to 13% or $4.30 billion to $4.50 billion compared to the consensus of $3.94 billion. This will be compounded by slightly wider margins and EBITDA growth in the range of 11% to 18%.
Catalent Plans To Buy Bettera
Catalent, Inc announced along with the Q4 earnings report its intentions to buy closely held Bettera. The deal is worth $1 billion in cash and would greatly expand its capacity to produce gummies and other soft chew products. Bettera is expected to grow with a 20% CAGR in the near term at least and we think synergies between the two companies could accelerate that by 1000 basis points or more. In addition, the deal will help set the company up to service the growing Edibles vertical of the Cannabis Market and for eventual US Federal legalization.
The Technical Outlook: A Strong Uptrend, Continued
- Catalent is one of those stocks where the really long-term view provides the most perspective. The monthly chart of the stock shows the market in a strong uptrend that has recently consolidated and broken out to new highs. The fourth-quarter results and outlook have shares moving up to fresh new highs with today's action confirming the continuation of the trend. Using simple technical projections, we see this stock rising to the $160 to $170 range before hitting the next major resistance.
