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West Pharmaceutical (WST) Hits 52-Week High: What's Driving It?

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Shares of West Pharmaceutical Services, Inc. (WST - Free Report) reached a new 52-week high of $443.65 on Aug 17, before closing the session marginally lower at $441.85.

Shares of the company have gained 60.7% in the past year compared with the industry’s 27.5% growth and the S&P 500's 34.4% rise.

The company is witnessing an upward trend in its stock price, prompted by its robust proprietary products segment. West Pharmaceutical’s solid performance in second-quarter 2021 and continued strength in research and development (R&D) buoy optimism. However, information security breaches and forex woes are major downsides.

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Let's delve deeper.

Key Growth Drivers

Strong Q2 Results: West Pharmaceutical’s better-than-expected results in second-quarter 2021 buoy optimism. Successful implementation of pandemic initiatives has contributed to the favorable stock performance. The company was aided by solid organic sales growth in both of its base businesses and improving demand for products related to COVID-19 vaccines. The company’s high-value products (“HVP”), along with productivity gains, continue to drive higher gross and operating margins. It continues to witness strong uptake of HVP components, which include Westar, FluroTec, Envision and NovaPure offerings, along with Daikyo’s Crystal Zenith. A raised financial outlook for 2021 further instills optimism on the stock.

Robust Proprietary Products Segment: West Pharmaceutical’s proprietary products business continues to exhibit sustained strength, raising optimism. Net sales at this segment have been demonstrating strong year-over-year growth over the past year, and the first half of 2021 was no exception. Sales improved 39.6% organically in the second quarter owing to double-digit growth in HVP (which made up 70% of sales in the quarter) and strong momentum throughout the biologics and pharma market units.

Continued Strength in R&D: West Pharmaceutical maintains its own research-scale production facilities and laboratories for creating new products, and provides contract engineering design and development services to help customers with new product development. The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injection, and safety and administration systems.

West Pharmaceutical also remains committed toward seeking new innovative opportunities for acquisition, licensing, partnering or development of products, services and technologies. The company is focused on its objective to connect the dots throughout science and technology to fulfil ideas for potential value creation.

Downsides

Forex Woes: West Pharmaceuticals’ business is exposed to foreign currency exchange rate fluctuations. Despite several of the company’s manufacturing facilities and suppliers being present outside the United States, West Pharmaceuticals plans to continue its expansion into emerging markets outside of the country in the future. Almost all of the company’s international sales, assets and associated costs and expenses are valued, earned or incurred in the currency of the local country – mainly Euro, the Singapore Dollar and the Danish Krone. Apart from translation risks, the company also incurs currency transaction risks when it or one of its subsidiaries enters into a purchase or sales transaction in a currency other than that entity’s local currency.

Information Security Breaches: West Pharmaceutical’s systems and networks, along with that of its customers’, suppliers, service providers and banks, have and might become the target of cyberattacks and information security breaches in future. This can lead to unauthorized release and misuse of confidential or proprietary information about the company and its employees or customers, and can also hamper or damage its operations or that of third parties. Failure to comply with regulations or prevent the unauthorized access, release and/or corruption of the company’s or its customers’ confidential information, can result in financial losses and also hurt its reputation.

Zacks Rank & Other Key Picks

Currently, West Pharmaceutical carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.

Intuitive Surgical’s long-term earnings growth rate is estimated at 9.7%. It currently carries a Zacks Rank #2.