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Category: Stock Market and Catalent
Date: 28 August 2019 Stock Price: $52.83 We take a look at the latest earnings report from Catalent, the advanced technologies and development solutions for drugs and biologics firm for the 4tf quarter of their 2019 fiscal year.
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About Catalent
Catalent, Inc. is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products. With over 80 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs over 11,000 people, including over 1,400 scientists, at more than 30 facilities across five continents, and in fiscal 2017 generated over $2 billion in annual revenue.
Financial overview of Catalent's latest results
Numbers highlighted in the earnings report:
Numbers we are interested in: (for the quarter):
- Q4'19 revenue of $725.7 million increased 6% as-reported, or 8% in constant currency, from Q4'18.
- Full-year 2019 revenue of $2,518.0 million increased 2% as-reported, or 5% in constant currency, from the prior year.
- Announced an agreement to purchase Bristol-Myers Squibb’s oral solid, biologics, and sterile product manufacturing and packaging facility in Anagni, Italy.
- Significantly expanded the capacity of our global spray drying operations through an agreement with Sanofi Active Ingredient Solutions.
- FY'20 financial guidance range reflects revenue growth of 10% to 14%, and adjusted EBITDA growth of 17% to 22%.
Numbers we are interested in: (for the quarter):
- Net revenue: $725.7 million (up 8% from $685.3 million for the same quarter of the previous year)
- Cost of sales: $469.2 million (up 7% from $451.9 million for the same quarter of the previous year)
- Gross margin : $256.5 million (up 12% from $233.4 million for the same quarter of the previous year)
- Net earnings: $71.1 million (down 12% from $82.7 million for the same quarter of the previous year)
- Weighted average diluted shares outstanding: 147.2 million (up from 135.1 million for the same quarter of the previous year)
- Diluted earnings per share: $0.44 (down 31% from $0.61 for the same quarter of the previous year)
- Cash and cash equivalents: $345.4 million ( down from $410.2 million for the same quarter of the previous year)
- Cash and cash equivalents per share: $2.34 (or 4.4% of the group's share price)
- Trade receivables, net: $716.4 million (up from $555.8 million for the same quarter of the previous year)
- We note the 28,9% increase in the group's trade receivables (money owed to the group for goods and services delivered)
- Trade receivables made up 11.6% of the group's total assets. The concern with that is that if they are not paid for goods or services rendered legal costs will be incurred to try and obtain payment otherwise non payments might be written off so it is important that trade receivables don't make up to big a chunk of a company's total assets. 11.6% is still at acceptable levels though.
- Inventories: $257.2million (up from $209 million for the same quarter of the previous year)
- Inventories increased by 23.1% compared to the same period of the previous year
- Inventories made up 4.2% of the group's total assets
- Cash generated from operations (for full fiscal year): $247.7 million
- Cash generated from operations per share (for full fiscal year): $1.68
- PE ratio: 33 (assuming earnings for 4th quarter is repeated for a full year)
Catalent management commentary on the results and earnings guidance
SOMERSET, N.J.--(BUSINESS WIRE)--Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products, today announced financial results for the fourth quarter of fiscal year 2019, which ended June 30, 2019. As a reminder, ASC 606, the new revenue accounting standard, applies to our fiscal 2019 results, and the prior standard applies to fiscal 2018.
Fourth quarter 2019 revenue of $725.7 million increased 6% as reported, or 8% in constant currency, from the $685.3 million reported in the fourth quarter a year ago, primarily driven by the impact of the Paragon Bioservices acquisition within the Biologics and Specialty Drug Delivery segment, and the impact of the Juniper Pharmaceuticals acquisition within the Oral Drug Delivery segment; partially offset by a reduction in revenue from comparator sourcing arrangements, due to the ASC 606 changes, by which we now record such revenue on a net versus the former gross basis. Excluding the impact of the change in comparator sourcing revenue accounting and the impact of Paragon and Juniper, revenue increased 4% in constant currency driven by organic growth within our Softgel Technologies, Oral Drug Delivery, and Biologics and Specialty Drug Delivery segments. For fiscal 2019, revenue was $2,518.0 million and increased 2% as reported and 5% in constant currency, compared to $2,463.4 million in the prior-year period. The fiscal 2019 revenue growth was driven by the Catalent Indiana (formerly Cook Pharmica), Juniper, and Paragon acquisitions, along with favorable end-customer demand for our biologics drug product offerings, offset by the comparator sourcing accounting change. Excluding these acquisitions and the accounting change, fiscal 2019 revenue increased 2% in constant currency.
Fourth quarter 2019 net earnings were $71.1 million, or $0.44 per diluted share, compared to net earnings of $82.7 million, or $0.61 per diluted share, in the fourth quarter a year ago. For fiscal 2019, net earnings were $137.4 million, or $0.90 per diluted share, compared to net earnings of $83.6 million, or $0.63 per diluted share, in the prior year.
Fourth quarter 2019 EBITDA from operations of $165.4 million, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, decreased $6.6 million from $172.0 million in the fourth quarter a year ago. Fourth quarter 2019 Adjusted EBITDA (see the non-GAAP reconciliation for a discussion of this metric) was $199.4 million, or 27.5% of revenue, compared to $181.5 million, or 26.5% of revenue, in the fourth quarter a year ago. This represents an increase of 10% as reported, and an increase of 11% on a constant-currency basis. Fourth quarter 2019 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $102.9 million, or $0.70 per diluted share, compared to Adjusted Net Income of $90.0 million, or $0.67 per diluted share, in the fourth quarter a year ago.
“Our financial performance for the fourth quarter was in line with our expectations and caps a year of significant achievement for Catalent, putting us in an excellent position as we head into fiscal 2020, where our guidance reflects organic revenue and adjusted EBITDA growth rates aligned with our recently increased long-term outlook,” said John Chiminski, Chair and Chief Executive Officer of Catalent, Inc. “We are excited by our May 2019 acquisition of viral vector developer and manufacturer Paragon Bioservices, which has already begun to accelerate Catalent’s financial growth, as well as our agreement to purchase Bristol-Myers Squibb's oral solid and biologics manufacturing and packaging facilities in Anagni, Italy. We believe these transactions will create substantial value for our customers, patients, and shareholders.”
Fourth quarter 2019 revenue of $725.7 million increased 6% as reported, or 8% in constant currency, from the $685.3 million reported in the fourth quarter a year ago, primarily driven by the impact of the Paragon Bioservices acquisition within the Biologics and Specialty Drug Delivery segment, and the impact of the Juniper Pharmaceuticals acquisition within the Oral Drug Delivery segment; partially offset by a reduction in revenue from comparator sourcing arrangements, due to the ASC 606 changes, by which we now record such revenue on a net versus the former gross basis. Excluding the impact of the change in comparator sourcing revenue accounting and the impact of Paragon and Juniper, revenue increased 4% in constant currency driven by organic growth within our Softgel Technologies, Oral Drug Delivery, and Biologics and Specialty Drug Delivery segments. For fiscal 2019, revenue was $2,518.0 million and increased 2% as reported and 5% in constant currency, compared to $2,463.4 million in the prior-year period. The fiscal 2019 revenue growth was driven by the Catalent Indiana (formerly Cook Pharmica), Juniper, and Paragon acquisitions, along with favorable end-customer demand for our biologics drug product offerings, offset by the comparator sourcing accounting change. Excluding these acquisitions and the accounting change, fiscal 2019 revenue increased 2% in constant currency.
Fourth quarter 2019 net earnings were $71.1 million, or $0.44 per diluted share, compared to net earnings of $82.7 million, or $0.61 per diluted share, in the fourth quarter a year ago. For fiscal 2019, net earnings were $137.4 million, or $0.90 per diluted share, compared to net earnings of $83.6 million, or $0.63 per diluted share, in the prior year.
Fourth quarter 2019 EBITDA from operations of $165.4 million, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, decreased $6.6 million from $172.0 million in the fourth quarter a year ago. Fourth quarter 2019 Adjusted EBITDA (see the non-GAAP reconciliation for a discussion of this metric) was $199.4 million, or 27.5% of revenue, compared to $181.5 million, or 26.5% of revenue, in the fourth quarter a year ago. This represents an increase of 10% as reported, and an increase of 11% on a constant-currency basis. Fourth quarter 2019 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $102.9 million, or $0.70 per diluted share, compared to Adjusted Net Income of $90.0 million, or $0.67 per diluted share, in the fourth quarter a year ago.
“Our financial performance for the fourth quarter was in line with our expectations and caps a year of significant achievement for Catalent, putting us in an excellent position as we head into fiscal 2020, where our guidance reflects organic revenue and adjusted EBITDA growth rates aligned with our recently increased long-term outlook,” said John Chiminski, Chair and Chief Executive Officer of Catalent, Inc. “We are excited by our May 2019 acquisition of viral vector developer and manufacturer Paragon Bioservices, which has already begun to accelerate Catalent’s financial growth, as well as our agreement to purchase Bristol-Myers Squibb's oral solid and biologics manufacturing and packaging facilities in Anagni, Italy. We believe these transactions will create substantial value for our customers, patients, and shareholders.”
Catalent's company (NYSE: CTLT) stock price history
The image below, obtained from Google, shows the stock price history of Catalent over the last 5 years. And its been a good old time for Catalent investors over the last 5 years. 5 years ago Catalent stock was trading at around $22 a share and its currently trading at around $53 a share. Strong returns offered to shareholders.
Catalent's (NYSE: CTLT) stock valuation
Based on the group's latest financial results we value Catalent stock at $46.20 a share. Our target price (full value price) of $46.20 takes into account the group's latest financial results including the worrying increase in its inventories and trade receivables as well as the group's guidance and expectations of EBITDA growth of around 17% to 22%. Even with strong expected EBITDA growth for Catalent our valuation models still provided a stock price target well below their current price. We therefore expect Catalent to pull back from its current levels to closer to our target price.