Catalent 'Is Starting To Move In The Right Direction,' Analyst Says, But Cautions Lack of Visibility for FY24

Monday, Catalent Inc CTLT announced Q3 results that it delayed twice in May.

William Blair says the results were better than expected, with revenue of $1.04 billion exceeding their $952 million estimate and adjusted EBITDA of $105 million, above their $90 million target.

The analyst says the company’s Biologics segment drove the top-line beat, although the vast majority of the outperformance was due to higher-than-expected COVID revenue and a moderate FX headwind.

Catalent lowered its guidance for fiscal 2023 revenue, adjusted EBITDA, and adjusted EPS primarily due to lower expectations for its Pharma and Consumer Health business in Q4. 

The management’s commentary around biotech funding and internal leading demand indicators showing signs of improvement was encouraging, and the company has seen productivity improve at its Bloomington and Brussels facilities. 

The analyst also noted that the management was clear that more work and time are needed to restore previous operational levels at each facility. 

William Blair notes the lack of visibility into the outlook for fiscal 2024.

Based on its math, the analyst estimates that $900 million in adjusted EBITDA is a reasonable target for next year. 

Applying 14.0 times multiple to this fiscal 2024 target implies a stock price in the mid-40s, representing limited upside to the company’s current level. As a result, it reiterates its Market Perform rating.

Price Action: CTLT shares are up 2.88% at $44.01 on the last check Tuesday.