Catalent, Inc. has been gaining on the back of its robust facility expansion activities over the past few months. A robust first-quarter fiscal 2022 performance, along with a slew of strategic deals over the past few months, is expected to contribute further. Catalent’s operation in a competitive landscape and regulatory requirements pose a threat.

Over the past year, this Zacks Rank #2 (Buy) stock has lost 13.3% compared with 30.5% fall of the industry. The S&P 500 composite rose 19.2% in the said time frame.

The renowned global provider of advanced delivery technologies has a market capitalization of $17.56 billion. Catalent projects 16.9% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 9.88% for the past four quarters, on average.

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Let’s delve deeper.

Expansionary Activities: We are upbeat about Catalent’s robust expansionary activities via the opening of a slew of facilities over the past few months. The company, this month, increased its cold chain packaging capabilities at its Philadelphia, PA facility to support increased demand for the distribution of biologic drugs, and advanced cell and gene therapies.

Catalent, in October 2021, opened a new facility in San Diego, CA in response to increased demand from pharmaceutical and biopharmaceutical customers for integrated development, clinical packagin, and distribution solutions on the U.S. West Coast.

Strategic Deals: We are optimistic about Catalent’s robust growth opportunities via its recent tie-ups and buyouts. The company, along with BrainStorm Cell Therapeutics Inc., in December 2021, announced that the technology transfer for the latter’s NurOwn manufacturing at Catalent’s facility has been finalized.

The company, in September, signed a commercial supply agreement with Phathom Pharmaceuticals for its lead compound — vonoprazan — a novel, orally active-potassium competitive acid blocker (P-CAB).

Strong Q1 Results: Catalent’s solid first-quarter fiscal 2022 results, along with the year-over-year uptick in both the top and the bottom lines, buoy optimism. Continued strength in its Biologics arm in the quarter under review is encouraging as well. Robust performances by the Clinical Supply Services, and Softgel and Oral Technologies segments, also raise our optimism. Expansion of both margins bodes well.

Downsides

Regulatory Requirements: The healthcare industry is highly regulated, wherein Catalent and its customers are subject to various local, state, federal, national and transnational laws and regulations, including the operating, quality, and security standards of the FDA and the DEA, among others. Any future change to such laws and regulations could adversely affect the company. Failure by Catalent or its customers to comply with the requirements of these regulatory authorities could result in warning letters, among other actions.

Stiff Competition: Catalent operates in a highly competitive market where it competes with multiple companies, including those offering advanced delivery technologies and outsourced dose form or biologics manufacturing. The company also competes in some cases with the internal operations of those pharmaceutical, biotechnology and consumer health customers that also have manufacturing capabilities and choose to source these services internally.

Estimate Trend

Catalent is witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 6.8% north to $3.75.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2022 revenues is pegged at $1.16 billion, suggesting a 27.2% improvement from the year-ago quarter’s reported number.

Other Key Picks

A few other stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Cerner Corporation and Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) .

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.51%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has gained 36.4% against the industry’s 59.3% fall over the past year.

Cerner, carrying a Zacks Rank #2, has an estimated long-term growth rate of 12.8%. CERN’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 3.21%.

Cerner has gained 15.3% against the industry’s 55.1% fall over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%. It currently carries a Zacks Rank #2.

Henry Schein has gained 8.9% compared with the industry’s 2.8% growth over the past year.