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Catalent moving needle on top line growth

May 6, 2017

Shares of Catalent Inc. (NYSE:CTLT) rose over 20% today after releasing third-quarter fiscal 2017 financial results. The company manufactures drug delivery technologies and development solutions, such as softgel capsules and drug packaging, for pharmaceuticals, biologics, and consumer health products. A solid string of quarterly performances continued in the most recent period, including double-digit organic revenue growth and a more than doubling of earnings per share.

Additionally, Catalent closed its second strategic acquisition of the year, which will boost the company’s footprint in over-the-counter and prescription softgel products. As of 1:49 p.m. EDT, the stock had settled to a 6.5% gain.

Management is working hard to grow a top line that has barely budged since fiscal 2013, staying relatively constant at approximately $1.8 billion in each of the four years since. The bottom line has improved on the heels of reduced expenses, but operating income has remained between $200 million and $240 million in the same period. Results from third-quarter fiscal 2017 show several signs of progress toward those long-term goals.

Metric Q3 Fiscal 2017 Q3 Fiscal 2016 % Change
Revenue $532.6 million $438.0 million 21.6%
Operating income $64.6 million $31.3 million 106.4%
EPS $0.21 $0.09 133%


More importantly, revenue growth is being achieved across all three segments, while EBITDA growth is being achieved in two of three (and barely declined in the third). The company’s fiscal year-to-date GAAP net income is still below that achieved at the same point in fiscal 2016, however, due to a $14.9 million swing in tax and other expenses.

Nonetheless, the steady performance in the last nine months has given management confidence in its most recent financial guidance, which calls for the following:

Metric Fiscal 2017 Guidance Fiscal 2016 Actual % Change
Revenue $1.94 billion to $1.98 billion $1.85 billion 4.8% to 7%
Adjusted EBITDA $435 million to $450 million $401.2 million 8.4% to 12.1%
Adjusted net income $168 million to $183 million $153.2 million 9.7% to 19.4%


The encouraging news for investors is that even if the lower end of each range is met, the performance will represent a respectable increase from last year’s achievements.

Catalent stock has been relatively volatile in the last year, but today’s rise has pushed shares to 21% gains in the period. If management continues to successfully execute on the long-term strategy and meets internal guidance for fiscal 2017, then shareholders will be on solid footing. Multiple signs of progress across the business hint that continued growth is a likely outcome for the final quarter in the fiscal year.


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