Why Catalent Inc. Rose as Much as 17% This Morning

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What happened

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Shares of drug-delivery technology specialist Catalent (NYSE: CTLT) jumped as much as 17% Tuesday morning in the wake of the company's 2017 fiscal year earnings report, released Monday after the market closed. As investors can probably guess, it was a pretty good 12 months. But management expects the next 12 months will be even better. 

In addition to strong business momentum financially speaking, Catalent reported that it had entered into a long-term supply agreement to produce the next-generation OTC pain relief product from Pfizer, Advil Liqui-Gels Minis. It's just the latest indication that its growth won't be stopping anytime soon. As of 11:30 a.m. EDT, the stock had settled to a 15% gain.

So what

Here are a few highlights from the annual GAAP financial metrics Catalent reported:

  • Fiscal 2017 revenue of $2.07 billion, or growth of 12%.
  • Operating income of $234 million, or growth of 7.5%.
  • Net income of $110 million, or a decline of 1.5%.
  • EBITDA of $372 million, or a decline of 0.6%.
  • Operating cash flow of $299 million, or growth of 92.8%.

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That doesn't look too impressive, but Catalent goes to great lengths to adjust its finances. The adjusted, non-GAAP numbers look quite a bit better for fiscal 2017 compared to the year-ago period:

  • Adjusted net income of $185 million, or growth of 21.1%.
  • Adjusted EBITDA of $450 million, or growth of 12.1%.

While adjusted and non-GAAP metrics can provide insights into a company's performance, investors should only focus on GAAP metrics when making investment decisions. With that in mind, here's the company's full-year fiscal 2018 guidance and growth ranges from just reported fiscal 2017 performance: 

  • Revenue of $2.16 billion to $2.24 billion, or growth of 4.3% to 8.2%. 
  • Adjusted EBITDA of $477 million to $497 million, or growth of 6% to 10%.
  • Adjusted net income of $192 million to $212 million, or growth of 3.8% to 14.6%.

Now what

Adjustments or not, Catalent turned in another solid year. The top line grew by a double-digit percentage, operating cash flow nearly doubled, and two big acquisitions are already making contributions to the business. Earnings may not be growing in lockstep with revenue right now, but the company is still reporting healthy profits. As long as growth continues, I don't think investors will complain much about a slow-growing bottom line.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.